Finish the Essay 4 with A++++work

1 Unit 6: Externalities and the Environment

In this unit we will cover in depth the concept of externalities, what is meant by market failure, and how economists and policymakers propose to solve problems created by externalities. We will again focus on consequentialist justifications for interventions in markets, discuss allocation of resources across time, and discuss estimates of the effects of climate change and the effectiveness policies designed to fight pollution.

Book Chapters:

• Chapter 22: “Natural Resources, the Environment, and Climate Change”

Concepts:

• Externalities:

– Negative Externality

– Social supply curve

– Effect of a tax on the supply curve

• Time value of money

– Present discounted value

– Discount Rate/Factor

– Social Discount Rate/Factor

• Obj. v. Sub. preferences and externalities/discounting

– Contrast with other ap- proaches to ethics of conser- vation

• Property rights

– Role of property rights in externalities

– Public goods and the free- rider problem

– Tragedy of the commons

• Coase Thm.

– Applicability – Assumptions – How property rights can be

used to solve externalities

• Cap and Trade policies: pros and cons

• Statistical/Econometric meth- ods used to estimate impact of climate change and their results

– Enumerative v. Statistical – Comparative static – Marginal cost of carbon – Effect of increase in temper-

ature

Assignments:

• Quiz 7

• Essay 4

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Required Readings:

• Richard Tol. The economic effects of climate change. Journal of Economic Perspectives, 23(2):29–51, Spring 2009

Sources:

• Adma Isen, Maya Rossin-Slater, and W. Reed Walker. Every breath you take - every dollar you’ll make: The long-term consequences of the clean air act of 1970. Journal of Political Economy, 125(3):848–902, 2017

• Martin Weitzman. A review of the stern review. Journal of Economic Literature, 45(3):703–724, September 2007

• Lawrence Goulder. Markets for pollution allowances: What are the (new) lessons? Journal of Economic Perspectives, 27(1):87–102, Winter 2013

Prompt: Consider a world where the U.S. does not currently have a national policy related to climate change (neither a national carbon tax or cap and trade program):

• Provide a consequentialist justification for government/policy intervention in markets that concern natural resources and the environment.

• Explain the role of negative externalities and property rights in prevent- ing competitive markets from reaching optimal allocations of resources according to your normative framework.

• Discuss the size of potential negative externalities of climate change or pol- lution, and choose one of the policies for addressing negative externalities and explain how it could be used to correct for the problem.

• Consider the many estimates of the cost of carbon and climate change that we discussed. When suggesting a policy have in mind specific estimates of relevant parameters i.e. the marginal cost of carbon, and explain what role this cost plays in your policy suggestion.

• Make sure your choice is justified by your normative framework. You must include at least one supply and demand graph explaining your policy suggestion.

References

[1] Lawrence Goulder. Markets for pollution allowances: What are the (new) lessons? Journal of Economic Perspectives, 27(1):87–102, Winter 2013.

[2] Adma Isen, Maya Rossin-Slater, and W. Reed Walker. Every breath you take - every dollar you’ll make: The long-term consequences of the clean air act of 1970. Journal of Political Economy, 125(3):848–902, 2017.

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[3] Richard Tol. The economic effects of climate change. Journal of Economic Perspectives, 23(2):29–51, Spring 2009.

[4] Martin Weitzman. A review of the stern review. Journal of Economic Literature, 45(3):703–724, September 2007.

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