Econ320:Syllabus

Economics 320 – Economy and Environment Spring 2011

Dr. Martha Campbell

• Office: Dunn 226, Tel. Ext.: 2201, email: campbelm@potsdam.edu
• Office Hours: MWF: 12 – 1; Th: 2 - 3, other times by appointment.

Course description

The first half of the course examines and compares three different ways economists have explained the current threat to the environment. From the ‘tragedy of the commons’ perspective of environmental economics, the environment is despoiled because it is not private property and has no price. For ecological economics, the problem is instead that economic systems disregard the ecological principle of sustainability. According to the third perspective (which is perhaps “eco-socialist”), the culprit is the capitalist economic system: the profit motive and its implications, constant economic growth and economic inequality. Each theoretical perspective gives rise to a particular approach to environmental policy. One aim of the course is to show how alternative policy approaches rest on different theoretical foundations (competing claims about the cause of environmental degradation). Recognizing the link between the two provides an important way of evaluating alternative environmental policy proposals.

The second half of the course examines specific areas of production, such as agriculture, energy, industry, and trade, the environmental problems associated with them, and proposed policy solutions. In this section, we apply, and continue to evaluate the competing perspectives and policy approaches considered earlier.

Objectives

1. To develop an awareness of the range of contemporary problems involved in the interface between the economy and the environment.

2. To describe and compare alternative conceptions economists have proposed for understanding the causes of and appropriate responses to environmental problems.

3. To identify which groups, both within one nation and among nations, bear the heaviest burden from environmental destruction.

4. To show how different conceptions of the cause of environmental problems are linked to different policy proposals to solve these problems.

5. To critically evaluate alternative policies for handling the environmental crisis.

Texts

Environmental and Natural Resource Economics: A Contemporary Approach, 2nd edition, Jonathan M. Harris, Houghton Mifflin Company, 2006 (to purchase)

Ecology Against Capitalism, John Bellamy Foster, Monthly Review Press, 2002 (to purchase)

The Political Economy of the Environment, James Boyce, Edward Elgar, 2002 (library reserve)

Robert Costanza & Herman Daly, “Natural Capital and Sustainable Development”, Conservation Biology, Vol. 6, No. 1 (Mar., 1992), pp. 37-46 (available atwww.Jstor.org)

Additional Readings: working papers and teaching modules from the Global Development and Environment (GDAE) Institute can be downloaded from the institute’s web page http://www.ase.tufts.edu/gdae (also a good source for term paper bibliography)

Some Reputable Environmental web sites: www.e3network.org and www.realclimateeconomics.org are both for Economics for Equity and the Environment; cakex.org for Climate Change Adaptation Exchange; Intergovernmental Panel on Climate Change: www.ipcc, www.nyh20 is about water quality, not confined to NY state; www.enn.com for Environmental News Network has a wide variety of news on environmental issues, searchable by topic; www.globalresearch.ca has an environment link; www.climatechangeecon.net.

Interdisciplinary class: students majoring in different disciplines are enrolled in this class. Please make an extra effort to contribute what you know based on your particular academic background and to help other students with different backgrounds understand the approach your discipline takes.

Course requirements

Attendance: Do not miss more than four classes (try not to miss even four classes!). Save allowable absences for emergencies. This course depends on class discussion. If you are not in class, you are not fulfilling one of the requirements of the course. Make sure your Potsdam email is working and check your email regularly. If you are absent, let me know why by email (not by phone).

Preparation for class and class participation: do the assigned reading before class and take notes on it. You are not prepared for class if you do not have both the reading itself and notes on it. When discussion questions on the reading are assigned, your notes should include an outline of answers to them. Make your own copy of readings outside the textbook (GDAE, Boyce & Daly and Costanza and bring your copy to the class in which it is discussed.

Do not use your cell phone in class for any reason (except in an emergency).

Discussion leaders

one student will give a brief introduction of each of the non-textbook readings, identifying key points and proposing questions for discussion. All students are responsible for doing the reading, whether or not it is their turn to be the discussion leader.

Essays & problems

Questions will be assigned from time to time on material we have completed and discussed. You will have a week to complete your answers. Answers are to be typed and checked for spelling and grammar.

5 minute Quizzes: brief quizzes at the beginning of many classes on the reading assigned for that class session.

Term Project

Project: 15 – 20 pages (exclusive of bibliography) on a specific environmental issue; this may be a theoretical (having to do with comparative perspectives) or an empirical issue. (1) The issue you choose should be narrow and well defined; attempts to handle broad issues in the framework of a one-semester course often yield results that are vague and trite. (2) Present the historical background relevant to your topic: describe the problem, its source and context. (3) Connect proposed (or implemented) policy solutions to a definite theoretical perspective: if you deal with a theoretical issue, present its policy implications; if you deal with a specific environmental issue, describe the policy that has been implemented or proposed to address this problem and explain why that policy implies a particular theoretical perspective. (4) Evaluate the policy. Evaluation should include such questions as: are the goals the policy is intended to achieve the right ones? is the policy likely to achieve its goals? is the policy better than alternative policy proposals? do critics of the policy make valid arguments? All parts of the project are to be turned in as paper copy and are to be typed in 12 point type with normal margins.

Schedule

Proposal for the project

due by 2/10 in class. The proposal should have a title and a brief explanation of the project. This is at least one long paragraph that explains, in specific terms, why the issue is significant and what you hope to discover in your research. Type your proposal.

Provisional bibliography

due by 3/1. You should have at least three substantial sources; at least five if your sources are articles. Newspaper articles do not count as “substantial sources.” You should have read the sources you list, at least sufficiently to identify their content. List the source and give a brief description of its content. Be careful that your sources are not overly technical. You may include some readings from newspapers, but your bibliography must include other kinds of sources (such as books, scholarly periodicals and reputable scholarly web sources). Advertisements from businesses are not permissible sources for your paper.

Reference style for your bibliography list (including punctuation)

• BASIC STYLE: author last name, first name. publication date. “Article title in quotation marks” OR Book Title in Italics. Publisher or Journal title, place of publication.
• FOR MORE THAN ONE AUTHOR: second (and additional) authors are listed with first name first, then last name.
• FOR CHAPTERS OF BOOKS: “Article title in quotation marks” in Book Title Italicized, edited by: editor’s first name & last name. Book publisher, place of publication.
• Sources must be cited for all facts, quotations, and attributions (for example: The Intergovernmental Panel on Climate Change (IPCC) concluded that the adverse health effects of climate change will be greatest in low-income countries.
• To cite sources in your paper: use a footnote with Author’s last name (date of publication): page number (where the fact or quotation appears).

First draft of your paper is due no later than 4/5 (typed, double spaced 12 point type).

• Arrange an office meeting with me between (weeks 10 & 11).
• Revised (or final) readable version of your paper is to be handed in no later than 4/28: paper copy to your assigned student commentator, paper or email version to me.

Presentations & Student Comments on Presentations: in the last week of class & during final exam time slot. Each student will give a brief description of his or her project and conclusions. Student Commentators: present a formal, prepared comment on the paper you have read. Type your comments to turn them in to me. All other students are encouraged to comment on all presentations. Attendance at all presentations is required for all students; make a point not to miss these classes. Final Version of your paper is due no later than the final exam (15-20 pages, typed, double spaced). The final version must have a formal bibliography listing the sources you have used. These sources must be cited in the text of your paper.

Repeating or close paraphrase of passages from any source must be indicated by quotation marks. The source must be identified, including a specific page. Quoting without quotation marks or citation is plagiarism and will be given a grade of zero. Extensive quotations are inappropriate.

EXTRA CREDIT: for preparing results of your research as a poster to include in the Spring Learning & Research Fair. Several students may collaborate on a submission for the research fair (but not on the term project). A preliminary proposal (Registration Form, under Events at www.potsdam.edu/RSPO) must be received by Kathy Chapman, Office of Research and Sponsored programs by 2/4. The poster must be ready for the Research Fair on 4/13.

The overall course grade is determined approximately as follows:

• General class preparation and participation: 15%
• Discussion leader & Paper Discussant: 15%
• Essays: 25%
• Quizzes: 10%
• Term Project (including its presentation to the class): 35%

Course Outline for Spring 2011

Dates for readings are provisional. Keep track of the pace of the course. Readings with a * may be dropped if we are behind schedule.

I. How Economists View the Environment: Alternative Perspectives & Policy Approaches

1/25 Introduction to the course: A first look at alternative perspectives, Harris Ch. 1 Introduction to Supply and Demand (covered in Harris, Ch. 3 Appendix)

1/27 Overview: Trends in economic & population growth; environmental sustainability Harris, Ch. 2, Ch. 10, pp.199-203

I. A. Environmental Economics

2/1 Environmental Externalities and Correcting for Them, Harris, Ch. 3

2/3 Environmental externalities, cont’d, Public Goods & the Coase Theorem, Ch. 3 Registration Form for Learning & Research Fair Due Friday 2/4 (Extra credit)

2/8 The Problem of the Commons, Harris, Ch. 4, Boyce, Ch. 1, p. 1-9

2/10 Allocating Resources over Time, Harris, Ch. 5 Term Project Proposal Due

2/15 Cost-Benefit Analysis, Harris, Ch. 6

2/17 “ “ “ & the Precautionary Principle, Harris, Ch. 6

2/22 Criticisms of Cost-Benefit Analysis: (1) The $6.1 Million Dollar Question, Ackerman & Heinzerling, GDAE 01-06; 2/24 Criticisms (2) Getting the Prices Wrong: The Limits of Market Based Environmental Policy, Ackerman & Gallagher, GDAE #00-05*

I. B. Ecological Economics

2/24 Basic concepts of ecological economics, Harris, Ch. 7, begin Ch. 8

3/1 National income from the green perspective, Harris, Ch. 8 Term Project Bibliography Due

3/3 Ecological model of the economic system, Harris, Ch. 9 & Five Kinds of Capital: Useful Concepts for Sustainable Development, Goodwin, GDAE 03-07

Spring Break: No Class 3/8 & 3/10

I. C. Capitalism and Environmental Destruction

3/15 Ecology Against Capitalism; Ecological Tyranny of the Bottom Line, Foster, Ch. 1 & 2

3/17 Ecology and the Common Good: Ecology and Human Freedom, Foster, Ch. 3 & 4

3/22 Critique of Ecological Economics from the Eco-socialist Perspective, Foster, Ch. 5, 6 & 7

3/24 A Land Ethic & is there a technological fix? Foster, Ch. 8 & 9

3/29 Alliance between environmentalists & workers, Foster, Ch. 10; Malthusian population theory, Foster, Ch. 11*

3/31 Ecological Economics (reconsidered): how would an eco-socialist respond? Robert Costanza & Herman Daly, “Natural Capital and Sustainable Development”, Conservation Biology, Vol. 6, No. 1 (Mar., 1992), pp. 37-46.

II. Area Studies

4/5 Agriculture, Harris, Ch. 11, Identifying the Real Winners from U.S. Agricultural Policies, Wise GDAE 05-07 First Draft of Term Project Paper Due

4/7 Use of Non-Renewable Resources, Harris, Ch. 12

4/12 Energy, Harris, Ch. 13 Annual Learning and Research Fair, Wednesday, April 13

4/14 Renewable Resource Management: Fisheries case, Harris, Ch. 14

4/19 Renewable Resources: Forests & Water, Harris, Ch. 15, Boyce, Ch. 8: “A squandered inheritance”

Spring Long Weekend: No Class 4/21

4/26 Pollution, Harris, Ch. 16 & Boyce, Ch. 6, Power distribution, the environment and public health

4/28 Climate Change, Harris, Ch. 18 (Focus on Policy Tools) Revised (or Final) Version of Term Project Due – Paper copy to your student reader, email to me.

5/3 World Trade and the Environment, Harris, Ch. 19 & Boyce, Ch. 7: The globalization of market failure

5/5 Institutions for Sustainable Development, Harris, Ch. 20 & Boyce, Ch. 9: “Democratizing Environmental Ownership”

5/10 Paper Presentations – written comments from student commentators due

5/12 Paper Presentations “ “ “ “

Final Exam Time Slot: Friday, May 20: 12:30 – 2:30 Paper Presentations Absolutely final version of all Term Projects Due Written Comments of Student Commentators Due

Economy & Environment

A short introduction to supply & demand theory

• Demand – by buyers
• Demand curve shows quantities of a product that consumers are willing to buy at various prices
• Assume:

1. price the consumer is willing to pay for a certain quantity of the product reflects the benefits (or satisfaction) the consumer receives from using that quantity of the product
2. the amount of extra benefit (or satisfaction) received from each extra unit of the product decreases for each extra unit consumed (diminishing marginal utility)

Law of demand: As the price falls, the quantity consumers are willing to buy increases (or consumers will only buy additional units of the product if the price is lower)

Quantity the consumer purchases at a given price reveals the amount of satisfaction (or benefits) the consumer gets from the product (which is subjective & invisible)

• Supply – by sellers
• Supply curve shows quantities of a product a seller (producer) is willing to make available at various prices
• Assume:

1. Price at which the seller is willing to offer the product for sale reflects the costs of producing the product (including average profits = profit the producer could have made in a different industry)
2. costs of producing each extra unit of product rise as additional units are produced (increasing marginal costs or diminishing returns to inputs)

Law of Supply: As the price rises, the quantity producers are willing to make available increases (the producer cannot afford to make more available at a lower price)

Quantity the producer sells at a given price reveals the true costs of producing the product

If the quantity supplied and demanded are not equal at any given price, the lower of the two quantities is exchanged. Competition among sellers or among buyers causes the price to change until quantity supplied and quantity demanded are equal.

The shape of the Average and Marginal revenue curves follow directly from the total product curve

Revenue corresponds to the benefits buyers attach to consuming fish

Average Revenue

= value of the total product divided by the number of boats declines because a larger number of boats decreases the catch of each one individual boats (firms) cannot consider their impact on the others

Marginal Revenue

= extra revenue from an additional boat when average revenue decreases, marginal revenue is less than average revenue

Market Outcome

number of boats (firms) increases until profit from a trip = 0

Profit

= Revenue from a trip – cost of a trip = Average Revenue – Marginal Cost

Ecological Maximum

the number of boats up to negative returns after the ecological maximum, each extra boat reduces the total catch indicates over-fishing or decline in the total stock of fish

Economic Optimum

at the number of boats where Marginal Revenue = Marginal Cost

• Marginal Revenue indicates benefits resulting from the consumption of fish
• Marginal Cost indicates costs of using resources (boats, labor, fuel) in fishing rather than the next best alternative below the optimum: benefits are greater than costs. Benefits to society increase if more boats are used to catch fish above the optimum: benefits are lower than costs. Benefits to society increase if fewer boats are used to catch fish. Therefore, when benefits = costs, benefits to society cannot be increased and are at a maximum.