chapter 12 vocab Flashcards
a tax levied on a product to reduce or eliminate the negative externality associated with its production
Pigovian tax
bringing external costs into the market (for example, by instituting a Pigovian tax at a level equal to the externality damage), thus making market participants pay the true social cost of their actions
internalizing negative externalities
a per-unit payment to producers to lower production costs and encourage greater production
subsidy
taxes instituted as close as possible in a production process to the extraction of raw materials
upstream taxes
offsetting any tax increases with decreases in other taxes such that overall tax collections remain constant
revenue-neutral (taxes)
the economic value of something, such as an environmental benefit, is equal to the maximum amount people are willing to pay for it
willingness-to-pay (WTP) principle
the value of something in an ecological or ethical sense, apart from any economic value based on willingness to pay
intrinsic value
tangible benefits that humans obtain from natural processes, such as nutrient recycling, flood control, and pollination
ecosystem services
nontangible welfare benefits that people derive from ecosystems without physical interaction (i.e., psychological benefits)
nonuse benefits
the sum of all the benefits for which people are willing to pay, with respect to an ecosystem or natural place
total economic value
economic valuation methods that obtain estimates for goods and services not directly traded in markets
nonmarket valuation techniques
a nonmarket valuation technique that estimates the direct and indirect costs associated with illnesses with environmental causes
cost of illness method
an estimate that represents the minimum potential value of something. The actual value is thus greater than or equal to the lower-bound estimate
lower-bound estimate
nonmarket valuation techniques that estimate the value of ecosystem services based on the cost of actions that provide substitute services
replacement cost methods
valuation techniques that infer the value of nonmarket goods and services based on people’s decisions in related markets
revealed preference methods
a revealed preference method used to obtain estimates of the recreation benefits of natural sites based on variations in the travel costs paid by visitors from different regions
travel cost models
a nonmarket valuation technique that obtains benefit estimates based on the cost of actions that people take to avoid environmental harm
defensive expenditures approach
nonmarket valuation techniques that directly ask survey respondents about their preferences in a hypothetical scenario
states preference methods
a stated preference method where survey respondents are asked about their willingness to pay for a hypothetical outcome
contingent valuation
a stated preference method in which respondents are asked to rank various hypothetical scenarios
contingent ranking
a technique to analyze a policy or project proposal in which all costs and benefits are converted to monetary estimates, if possible, to determine the net social value
cost-benefit analysis
an approach in which costs and benefits that occur in the future are assigned less weight (i.e., discounted) relative to current costs and benefits
discounting
the current value of a future cost or benefit, obtained by discounting
present value
the annual percentage rate at which future costs and benefits are discounted relative to current costs and benefits
discount rate
society’s willingness to pay to avoid one death, based on the valuation of relatively small changes in mortality risks
value of a statistical life (VSL)
the notion that policies should err on the side of caution when there is a low-probability risk of a catastrophic outcome
precautionary principle
policies that control pollution by setting maximum allowable pollution levels or controlling the uses of a product or process
pollution standards
policies that create an incentive for firms to reduce pollution without mandating that firms take any specific actions
market-based approaches (to pollution regulation)
a system of pollution regulation in which a government allocates permits that are required in order to produce pollution. After they are allocated, these permits may be traded among firms or other interested parties
tradable pollution permits
