Applying Economics to the Environment

"This text is perfect for economics majors, while an excellent microeconomics review can bring others up to speed. It] combines rigorous economics with actual policy problems and choices. I especially like the treatment of pollution dispersion (with lots of helpful diagrams), pollution monitoring, and risk analysis. The chapters on environmental protection in developing countries fill an important gap in existing texts."--Donald N. Dewees, University ofToronto"An easy--and pleasurable--read in environmental economics and policy."--Peter Bohm, Stockholm University"Engineers, scientists, attorneys, and policymakers working on environmental issues will find useful insights into the arcane world of economics, and discover new ways of communicating economic ideas in multi disciplinary contexts. Practitioners in international development institutions and analysts in the developing world will find their concerns addressed through a fresh look at the conventional wisdom about environmental policy and sustain ability. Lawmakersand regulators will see a much-needed treatment of environmental monitoring and enforcement, a facet of environmental policy which is too often neglected in most texts. In short, this book is not justfor students.] For working professionals in the private and public sectors who are interested in learning more about environmental economics, or for economists who just need to refresh their knowledge in a specific area, it will become an invaluable resource."--William J. Vaughan, Senior Economist, Inter-American Development Bank"Finally, someone has written an environmental economics textbook that is technically accurate but still intellectually accessible to those other than the professional economist. In addition, it includes topics that are essential to a full understanding of environmental problems including risk analysis, monitoring and enforcement, the difficulties in benefit and cost estimation, and the special problems of developing countries. It is just the book we haveneeded for environmental engineers to become familiar with the concepts therein so that their work is not dominated by technical efficiency nor economic efficiency interpreted in a narrow sense."--Frank L.Parker, Distinguished Professor of Environmental Engineering and Member, National Academy of Engineering

• FOREWORD ; CHAPTER 1: What Does Environmental Economics Have to do With the Environment?:- Some Historical Problems; Analyses of Causes and Solutions; Getting Closer to Specifics; A Sketch of Environmental Policy Choices; Development and the Environment; A Concluding Theme ; CHAPTER 2: Background on Actual Policy Choices:- A Little History; Efforts to Deal Legislatively with the Environment in the United States; The 1970s - A Decade of Environmental Legislation; Summarizing the Place of Economics in Environmental Legislation in the US; A Few Comments on International Comparisons and Global Concerns; Things to Keep in Mind ; CHAPTER 3: Microeconomics: Review and Extensions:- Demand, Willingness to Pay, and Surpluses; Optimization in Microeconomics; Supply/Marginal Cost; Social Welfare Notions: Prices and Optimality; Notes on Optimization and the Choice of Environmental Policy; Optimization in Microeconomics; Reminders; Appendix I - Chapter 3: Rationality; Demand Functions and Willingness to Pay; Time and Uncertainty; Ignorance of the Future; Risk and Uncertainty; Appendix II - Chapter 3: Correcting Market Failures: Is Partial Correction Better Than Nothing?; Optimizing with Inconveniently Shaped Functions; When Available Future Decisions are Changed by Present Decisions ; CHAPTER 4: An Introduction to the "Environmental" Part of Environmental Economics:- Functions of the Environment Relevant to Environmental Economics; Models of the Natural World; More About Space, Time, and Randomness; Ignorance; Concluding Comments and Reminders ; CHAPTER 5: Cost-Benefit Analysis and the Management of the Environment:- Going Beyond the Simplest Optimizing Problem; A More Formal and Complex Model of the Optimizing Problem; Doing Less Than Basin-Wide Net Benefit Maximization ; CHAPTER 6: Damage and Benefit Estimation: Background and Introduction:- Practical Arguments; Ethical Objections and Counter Considerations; Some Important Misunderstandings about Economics; Some Possible Bases for Valuing Environmental Goods and Services; The Heart of the Economic Approach; Benefit "Routes" - A Brief Review; Conclusions and Reminders ; CHAPTER 7: Indirect Benefit Estimation:- Demand Shifts: Complementarity; Cost Shifts: Averting, Replacing or Curing Expenditure; Travel Cost and Its Relation to Environmental Quality; Comments on Indirect Methods of Benefit Estimation More Generally; Conclusions and Reminders ; CHAPTER 8: Direct Methods of Benefit Estimation:- Strategic Responses; Cognitive Difficulties and Lack of Knowledge; Some Other Challenges for Direct Questioning Methods; Conjoint Analysis; Three Final, Practical Problems; An Attempt at a Bottom Line on Direct Questioning Techniques ; CHAPTER 9: Policy Instruments I: Some Basic Results and Confusions:- Narrowing Down; Bases for Judging Among Instruments; Static Efficiency; Contrasting the Static and Dynamic Cases; A Word about Subsidies; A Summary to This Point ; CHAPTER 10: Policy Instruments II: Other Considerations and More Exotic Instruments:- Comparing Instruments: Other Considerations; General Institutional Demands; Prices, Ethics and Politics in Environmental Policy; Other Dimensions of Judgement; Beyond Administered Prices and Straightforward Regulations; Liability Provisions; The Provision of Information; Challenge Regulation; Concluding Comments and Reminders ; CHAPTER 11: Monitoring and Enforcement:- Characteristics of Various M & E Settings; Elements of a Monitoring and Enforcement System; Some Simple Economics of Monitoring and Enforcement; Monitoring and Compliance as a decision Under Uncertainty; Conclusions and Reminders ; CHAPTER 12: Dealing with Risk: The Normative Model and Some Limitations:- Rational Models for Dealing with Risk; Cognitive Problems with Risky Decisions; Some Conclusions ; CHAPTER 13: Risk Analysis and Risky Decisions: Some Applications:- Risk Analysis and Risk Management; Irreversible Decisions, Ignorance, and the Techniques for Informing Decisions; Concluding Comments ; CHAPTER 14: Development and Environment: Descriptive Statistics and Special Challenges:- Trying to Understand Economic Growth and Sustainability; Describing Countries and Their Health and environmental Problems; Back to the Question of Special Challenges; Does Rising Income Lead to Better Environment and Thus to Sustainability?; Concluding Comments ; CHAPTER 15: Estimating Environmental Quality Benefits or Damages in Developing Countries:- Introduction; Benefit Estimation Methods for the Developing Country Setting; Direct, Hypothetical or "Stated Preference" Methods; Some Evidence on Contrasts Between Developing and Developed Countries; Conclusion ; CHAPTER 16: Choosing Instruments of Environmental Policy in the Developing Country Context:- The Institutional Setting in Developing Countries; Are Market-based Environmental Policy Instruments the Best Answer for Developing Countries? Observations and Suggestions; Some Evidence on the Actual Choices of Environmental Policy Instruments Being Made in Latin America; Concluding Comments; Appendix I - Chapter 16: Some Detail on Institutional Capabilities and Market Configurations in Latin america ; CHAPTER 17: Developing Country Environments and OECD Country Tastes: An Asymmetric Relation:- Some Possibilities for Cross-Border Influence; Where does That Leave Us?