Lecture E1/E2 (2020-11-24): Principles of Market-Based Environmental Policy

 In this wrap-up lecture, we briefly cover government policy approaches for mitigating sustainability problems. We start with the Coasean ideal (Coase Theorem and Coasean Bargaining) where government has little-to-no regulatory effect and socially efficient outcomes are still achieved. We then discuss problems with the Coasean approach (appreciable transaction costs) and discuss alternative government approaches -- including prescriptive regulations (command and control) like technology and performance standards, and information-based approaches like mandatory right-to-know laws and voluntary eco-labeling strategies. That then allows us to discuss Pigouvian approaches that internalize negative externalities with taxes (e.g., emissions taxes). We discuss how these Pigouvian taxes are corrective (not distortionary) and may even have a double-dividend effect. We close with a brief discussion of cap-and-trade (allowance trading), which achieves the same outcome as Pigouvian taxes by creating a Coase-like market for allowances.

Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/69qjs1c5e0p46yl/LectureE1E2-2020-11-24-Principles_of_Mkt-Based_Env_Policy.pdf?dl=0

Lecture D7/E1 (2020-11-19): Economics of Renewable Natural Resources, Part 5 - Fisheries

In this lecture, we continue to discuss the economics of fisheries -- private and open-access. The lecture reminds us of the logistic growth characteristics of fish populations and then presents a bio-economic model relating effort to harvest yield assuming that a fishery has reached steady-state. This bioeconomic fishery model allows us to predict that, for a private fishery, the fishery will never be biologically overfished. However, an open-access fishery may be both economically and biologically overfished. We then discuss how a common property fishery might be economically overfished but will at least be sustainable (i.e., not biologically overfished) in many cases. We end the lecture with a preview of the last lecture of new content for the semester -- a comment on the Pigouvian and Coasean approaches for thinking about environmental economics (and internalizing negative externalities due to environmental damages from production).

Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/qzabkwhedxk1xvd/LectureD8E1-2020-11-19-Economics_of_Renewable_Natural_Resources-Part_5-Fisheries.pdf?dl=0

Lecture D7 (2020-11-17): Economics of Renewable Natural Resources, Part 4 - Forest Economics

In this lecture, we close our discussion of forest/timber economics by putting an "economic rent" lens on the different rotations -- the biological rotation, the Wicksell Rotation, and the Faustmann Rotation (with a model of non-timber benefits). With an increase in opportunity costs, we see an increase in economic rent (which ends up reducing the amount of timber supplied to the market for the same price). This economic rent compensates for the lost opportunity. We then finish the discussion with a pivot to fisheries, which we will have to finish covering next lecture due to time constraints on this lecture.

Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/8mdl0u26yxh01td/LectureD7-2020-11-17-Economics_of_Renewable_Natural_Resources-Part_4.pdf?dl=0

Lecture D6 (2020-11-12): Economics of Renewable Natural Resources, Part 3 - Forest Economics

This lecture continues the exploration into the quantitative analysis of renewable natural resource management. We review the mean-annual increment (MAI) maximizing "biological rotation" as a model for finding a non-zero threshold for cutting when year-to-year growth drops sufficiently low. We then pivot off of MAI maximization to the Wicksell Rotation, which uses the prevailing interest rate as a threshold for critical growth rates. We then grow the Wicksell Rotation into the Faustmann Rotation, which includes the site value as well. We conclude with adding in the effect of other benefits of the natural resource (such as the non-timber benefits provided by maintaining old-growth habitat). That provides the opportunity to discuss methods for internalizing costs of habitat loss, with a brief introduction to Pigouvian and Coasean perspectives on the subject.

Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/96kprx6wxfn7jyq/LectureD6-2020-11-12-Economics_of_Renewable_Natural_Resources-Part_3.pdf?dl=0

Lecture D5 (2020-11-10): Economics of Renewable Natural Resources, Part 2 - Forest Economics

We continue to discuss the economics of natural resources in this lecture, with a particular focus on timber rotations. In the previous lecture, we introduced the biological rotation, which maximizes the mean annual increment (MAI). In this lecture, we introduce the time-value of money with the Wicksell and Faustmann Rotations (where the latter adds in the effect of opportunity cost from alternative uses of the site). We will continue this discuss in the next lecture, when we also add in habitat value.

Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/iy1qu95cxv61tgv/LectureD5-2020-11-10-Economics_of_Renewable_Natural_Resources-Part_2.pdf?dl=0

Lecture D4 (2020-11-05): Economics of Renewable Resources, Part 1 - Forest Economics

In this lecture, we review an example calculation of the efficient quantities to extract from a private, non-renewable resource (which follow's the prediction of Hotelling's Rule) and use that to motivate our introduction to modeling of renewable resource management. We start our discussion of renewable resources with an optimal aging problem where a private landowner determines which rotation (period before harvesting and then repeating) to use in order to maximize the total volume of wood produced by the woodlot. This results in the "biological rotation" (which maximizes the mean annual increment, MAI). In the next lecture, we will add in the time value of money (Wicksell Rotation) and alternative uses for the land (Faustmann Rotation) and alternative uses for the natural resource itself (like maintaining species habitat). 

Whiteboard notes from this lecture can be found at: https://www.dropbox.com/s/kseey7bpl4e9tbx/LectureD4-2020-11-05-Economics_of_Renewable_Natural_Resources-Part_1.pdf?dl=0

Lecture D2/D3 (2020-11-03): Economics of Nonrenewable Natural Resources, Part 2

In this lecture, we start to work through a quantitative analysis of the management of privately owned, non-renewable natural resources. We derive the intertemporal equimarginal principle result (which comes from maximizing net present value) and show how follows Hotelling's Rule about the rise in scarcity rent with interest rate over time. We work a numerical example for the 2-period efficient extraction quantities as well.

Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/gcmv5no5rbp8cz0/LectureD2-2020-11-03-Econ_of_Nonrenewable_Resources-Part_2.pdf?dl=0