1. Introduction and Social decision Flashcards
What has been the impact of shutting down domestic coal plants?
The coal mining supply simply moves overseas. Emissions do not go down, while those who work in coal mining lose their jobs
Who is most likely to benefit from the government giving out subsidies to make homes more efficient?
- Those that own homes
- Those who were going to rennovate their house anyway
Most environmental policies benefit those who are wealthier, inequality is therefore irrelevant
What are the best ways to analyse environmental policy?
Who is effected most vs what is economically most costly
Supply (industry) vs demand (government focus) side of environmental policy
What is the carbon scheme in the EU vs in Australia?
EU has emissions trading scheme which is different to carbon cost in Australia
What has happened to air pollution in the united states since 1990 and why?
It has decreased for the following reasons:
(Mainly because of better technologies, a rare success story)
Outsourced its high pollution manufacturing to other countries
Technology improvements in manufacturing
Output has fallen
Why has the coal industry often benefited from carbon pricing?
When emissions cost, producers up the price to pass on to the consumers, talk to government and have concerns about remaining profitable. Government then gives out permits for free. Profits aren’t effected and then you are given free permits to compensate you for the higher price and gain millions of dollars so often have rising profits.
What is the goal of environmental economics?
A central goal of environmental economics is to inform policy and solutions to environmental problems
What is positive economic analysis?
Not taking an opinion on what should be done. Free of value-judgements
What is normative economic analysis?
What should be done in the sense of values, explicitly or implicitly some level of value judgement and has trade-offs of some kind. Has value judegements
What is the role of economists in environmental policy?
Should not make a judgement, should talk about trade-offs and let other people decide what should be done
What is biocentrism?
All living things have intrinsic value. Biological world is valuable regardless of people
What is anthropocentrism?
The environment and non-human beings are only valuable to the extent that they are useful to humans
What is utalitarianism?
Actions are right if they maximise utility or well-beings (depends on how you value the environment)
Which view does environmental economics take?
Utilitarianism, value is determined by peoples decisions, not the economist
What is willingness to pay?
What is the smallest amount of money you would pay for that exchange, not the market price that leaves you just as well off as without paying and without receiving the good or service
What are the two ways people can gain value?
- Use values from direct use
- Non-use values (existence value, utilitarian perspective)
What does the utility possibility frontier show?
All the combinations of utility that are feasible with the fixed resources
What are the types of voting rules?
- Unanimity (Direct pareto improvement, everyone made better off/ no-one worse off)
- Side payments (potential pareto improvements)
What is a potential pareto improvement?
The winners can compensate the losers by at least enough to make them indifferent
What does a social welfare function show?
Adds up the benefit to each individual resulting in total utility
What are the three different approaches to social welfare functions?
Utilitarian: Value total utility, can weight people differently
Rawlsian: Only as well off as weakest
Egalitarian: Applies a penalty for inequality by weighting more heavily those on lower income
What is arrow’s impossibility theorem?
There is no rule that converts individual preferences into a social preference ordering that satisifies the following: Completness, Unanimity, Non-dictatorship, Universality, Transitivity, Independence
How does an economist recommend policy decisions?
- Take a utilitarian approach to value
- Separate efficiency from distributional questions
- Recommend potential-Pareto improvements
Why are transfer/ compensation payments often not made?
Because of the transaction costs to calculate and distribute them
