Economics - Section 4 Flashcards
What characterizes common property as “tragedies of the commons”?
when there is no restraint on access (non-excludability) and the resources of the property are overused (rival) and depleted because it is assumed there is no structure of norms, obligations, and expectations that keeps management in place
Why do critics of collective action argue that it [collective action] cannot work?
because of the free rider problem and difficulties of monitoring and enforcing rules and obligations.
What is the expression that is used to determine how much something in the future is worth today (its present value)?
Present Value= 1/(1+r)^t * Future Value -r is the discount rate -t is the length of time I have to wait from today to get it back
What is often used to explain how an emphasis on present choices dominates our concern for the future? In other words, what explains the obligations that present generations might/might not have to direct the decisions of those who are yet to be born?
time value of money
What are the three issues the USAD Economics Resource Guide focuses on in regards to the damages causes by climate change?
1). the magnitude of damages associated with rising global temperatures 2). the calculated social costs of those damages (specifically of carbon) 3). the uncertainty surrounding these estimates
True or False? It can be concluded that humans’ current levels of consumption and resource extraction are sustainable.
False; it is not sustainable as the associated negative externalities and public bads (including greenhouse gases in the earth’s atmosphere) suggest that current climate conditions may be headed towards an economic and ecological crisis
Define cost effectiveness
achieving a specific goal or objective at the least cost
What is the principal/agent problem? Provide an example as well.
the information and monitoring problems faced by a principal (individual/bodies in charge) seeking to oversee many agents (those being monitored) due to higher levels of jurisdiction. For example, as the area of the city that the mayor is trying to oversee it becomes harder to do it as efficiently compared to if the area was smaller. This is because the free rider problem increases as the familiarity between the parties declined; hard to know who is contributing and who is not
What are examples presented in the resource guide collective action succeeding?
groups organizing to confront aggression such as during WWII or in Ukraine after the 2022 Russian invasion
What happens to the value making income in the future worth a lot less as the denominator in the discount rate equation (Present Value= 1/(1+r)^t * Future Value) increases?
it makes the income in the future worth a lot less
What happens if there are high discount rates (r) and long-term future estimates (t) will do what to the present value in regards to the equation: Present Value= 1/(1+r)^t * Future Value
shrink the present value
In regards to the equation: Present Value= 1/(1+r)^t * Future Value, what does it mean if the discount rate (r) equals zero?
future income and consumption is valued just as much as at the present, this reduces the denominator to 1, meaning that we do not discount the future at all but it is given equal weight with the present
In regards to the equation: Present Value= 1/(1+r)^t * Future Value, what does it mean if the discount rate (r) is less than 0 (r<0)?
this means that the future is valued more than the present and we are willing to forgo present consumption, meaning the the discount rate is negative
Which two countries estimate that their SCC is close to zero?
Ukraine and Poland
Rich countries will face more natural disasters & burdens due to climate change. T/F
False
Climate is like the example of the economic house…
Shared obligations, if 1 person doesn’t clean the house looks messy
What is the free rider problem?
People can use public goods without paying for them
What is the SCC?
Social Cost of Carbon. How much damage in $ is each ton of carbon
How many years have climate negotiations (internationally) been going on?
40 years
What is multilateralism?
multiple countries & governments joining to pursue a goal
“While the trading system relies on commercial interdependence, the climate commons depends on _______”
ecological interdependence
What is a “GEO”
Global Environment Organization. A proposed institution for putting regulations on climate change on a global scale. dating as far back as the 1970s, bit still never put in place.
Public goods (& bads) are non___ & non___.
non-rival & non-excludable
When was the GEO constitution signed?
Tricked ya! (or not in which case good job) the GEO doesn’t exist yet
what city established the first binding emission reduction target to limit greehouse gas emissions in 1997?
Kyoto, Japan
What is required so a choice in economics can be cost effectively?
Comparative advantage
What major engine was invented in 1698 and what effect did it have?
The Savery steam engine is invented; the dawn of the Industrial Age begins with a reliance on fossil fuels.
How does the trading rules under the WTO system affect trade?
Trading rules under the WTO system encourage and enforce reductions in protection and more open trade.
What is the standing Committee on Trade and Environment of WTO goal?
In 1995, the WTO created a standing Committee on Trade and Environment due to widespread perceptions that trade expansion might be environmentally damaging and that environmental protection measures could act as barriers to freer trade.
When and by who was the ITO proposed and rejected?
At a conference in Havana, a proposal emerged in 1948 for an International Trade Organization (ITO). The ITO proposal was blocked in the U.S. by a hostile Republican Congress.
How can geoengineering bring “free driver” problem?
Raises the problem of the structure of authority governing such a decision. Geoengineering could have a “free driver” problem in that one party may decide to act unilaterally.
What are the reasons to the projected economic damages to the U.S. economy?
Projected economic damages to the U.S. economy, as well as the rest of the world, due to climate change include declines in agricultural productivity, increased mortality, added energy use, storm activity, drought, and floods.
AT what conference where the GATT world trade rules created?
The GATT world trade rules are created at the Havana Conference.
When was the UNEP created?
In 1972 the UN Environment Program (UNEP) is created.
When and where was the first world climate conference held?
In 1979 the First World Climate Conference is held in Geneva, Switzerland.
When was the Montreal Protocol on Substances that deplete the Ozone layer adopted?
In 1987 The Montreal Protocol on Substances that Deplete the Ozone is adopted.
What did the Paris agreement of 2016 accomplished?
The Paris Agreement legally binding an international treaty on climate change, adopted by 196 Parties at the UN Climate Change Conference, including the U.S. It enters into force in 2016.
What are the two ways externalities can reflect and what reflects them?
Individuals, firms, (or in climate’s case) countries reflect externalities in two ways: unidirectional (one way) or reciprocal (two way) Climate is one of the externalities that involve reciprocal interactions. However the effects aren’t evenly distributed. Such as the Greenhouse Gas Emissions. U.S. and China emit a substantial amount more than others.
What determines how parties can control externalities? Give an example.
Severity, type, period of time control must be exercised. Example: Pollution from coal-fired power plants, can be controlled by scrubbers on smokestacks, but smoke from fires can not. The Coal-Fired plants (from 1970 legislation) took years to pass, implement and litigate.
What are ways to promote changes in behavior to resolve externalities related issues?
inventive such as taxes and subsides, and negotiations. Legal action such as suits or court-ordered demands happen. With the exception of negotiations, these require a third party, such as tax, subsiding authority, administrative agency, court, or an international body
True/False: In climate policy, many remedies are beyond capacity of local authorities, requiring higher actions or organization and jurisdiction which always exists.
False: In some instances higher actions of organization and jurisdiction do NOT exist. For example, there are no institutional guardians of the atmosphere that have the ability to order countries to cease and desist
A public good is something that is supplied in a large area by many people. What are two defining characteristics that a public good will have?
- They are Non-Rival, meaning, consumption of the good does not compete with your consumption of the same good. 2. Non-Excludable: Individuals cannot be kept out or excluded from consuming
Contrasting the fact that a public good is non-excludable, what can be said about the duality of private and public goods, and what problem does this set up for public goods?
In a competitive market, private goods all have the same price (in equilibrium), people will only consume as much as needed. Since, public goods goods are non-excludable people have different values of them, this sets up the Free Rider problem
What is the Free Rider problem?
consuming a good for less than its value. (If no one knows how much you are willing to pay, its easy to undervalue it, especially if it’s just an expectation to pay.)
Economically, what problem is one of the major reasons reducing Green house gas (GHG) emissions falls short.
The Free Rider Problem, reducing GHG emissions requires contributions, free riding typically means these contributions will fall short, requiring interventions to encourage/enforce the lacking contributions.
Institutions need to provide “cost-effective” remedies when large-scale externalities are having problems. What issues can rise from the scale they are designed?
issues of space, authority, and jurisdiction
