Econ 131 lecture 4

Econ 131 lecture 4 - Problem Sets Problem set 1 solutions...

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Problem Sets Problem set 1 solutions posted on Ted Problem set 2 online, due before quiz Quiz on 10/13, a week from Thursday Reading Today: Chapter 4 (and start Ch. 5) Thursday: Chapter 5
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Review: Discounting Two distinct reasons for discounting Pure rate of time preference: we simply care less about generations far in the future Consumption discounting: generations far in the future are likely to be richer than we are Discounting can have dramatic inFuence on which policies to undertake Low rates emphasize the future -- in environmental policy this is often when most of the bene±ts happen Discounting Example from EPA (for energy star subsidies) 20 year T-bill rate in October 2011: 2.51% PV of $1/year for 20 years: $15.57
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From last class: Relation of WTP to income In practice, people with lower incomes usually have lower WTP for environmental cleanup If a country doesn’t have enough resources to provide basic schools, should it cut schooling even further to reduce air pollution, or preserve habitat? Often, the root problem is the inequality itself: Changing it might involve wealthier countries (or neighborhoods) helping poorer ones both with their schools and with air pollution. If left in isolation, the tradeoff will be dif±cult and the
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This note was uploaded on 01/30/2012 for the course ECON 131 taught by Professor Groves during the Spring '09 term at UCSD.

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Econ 131 lecture 4 - Problem Sets Problem set 1 solutions...

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