Final Review

Question 1

Why do we discount?

Answer 1

1- time value of money (could be making more with $)

2- pure time preference (we just want money now)

Question 2

Stern vs nordhaus

Answer 2

Nordhaus- high discount rate for climate change
Stern- low discount

0% discount rate is complete value retention

Question 3

How to set up CBA?

Answer 3

1- specify project
2- determine inputs/outputs
3- value non market costs and bennefits
4- compare c/b

Question 4

What is risk neutrality?

Answer 4

The willingness to assume risk to ensure returns,
Can be risk averse- maximin (least worst outcome)

Nuetral expected value ( highest expected value)

or seeking maximax (alternative with best outcome)

Question 5

Frame work of eval (1)

What is total economic value? (TEV)

Answer 5

Describes 3 values

1) direct use value
- extractive
2) indirect use value
- ecosystem service such as life support or soil ret.
3) non use value
- existance value, inherent value, could be option value or bequest

Question 6

Framework of eval (2)

What are ecosystem services?

Answer 6

4 catagories

1) provisioning services (extractive)
2) regulating (indirect use)
3) cultural (non use/ indirect)

4) supporting services - these help support other 3 and can be nutrient cycling for example (non use)

Question 7

Techniques for valuation

Preferences?

Answer 7

Have both stated and revealed

Question 8

Revealed preferences?

Answer 8

Creates market based and surrogate markets

Question 9

Market based valuation?

Answer 9

1- market prices
Value traded at in markets, however, environment often not represtented

2- Production function
Statistical model that can project present and future production, need lots of good info

3- avoided cost
Defensive expenses, only provides human substitutes

Question 10

Surrogate markets? (Revealed preference)

Answer 10

Hedonic pricing
Just used for homes, only applicable where consumers know about homes

Travel cost
$ to travel to a location is willingness value, not equitable

• only looks at use value
• value of time?
• multi site trips
• estimated costs

Question 11

Non market based valuation (stated preference)

Answer 11

Contingent value
- comes usually to dichotomous choice
- choice experements
Theoretical

Question 12

Discrete choice modeling

Answer 12

Creates bundles of options that people choose between, creates a flexible modle that reveals preferences

Question 13

Kinds if bias

Answer 13

Interviewer bias, framing bias, anchoring bias, social desirability bias and hypothetical bias

Question 14

Stated preference limitations

Answer 14

Wtp vs wta

Strategic response

Lack of knowledge

Question 15

Classifying pollutants

Answer 15

1- absorptive capacity
      - cumulative(stock) vs noncumulative(flow) 
2- spatial scale
       - local vs global
3- origin
       - point vs non point source
4- occurance 
        - continual vs episodic

Question 16

Pollution as an economically defined concept

Answer 16

Absorptive capacity
^
|
Emissions-> pollution accumulation-> damage -> econ value

Question 17

Marginal damage cost curve

Answer 17

Relation between quantity of pollutant and marginal damage of each unit of it

Usually slopes upward

Question 18

Problems with optimal pollution?

Answer 18

1 uncertainty - hard to estimate price of MAC and MDC
2 weak sustainability
3 ignores equity
4 ignores marginal utility of money

Question 19

Alternative to optimal pollution analysis

Answer 19

1 show MAC and MDC with uncertainty
2 set absolute standards (safe min standards, sms)
3 determine affordability in sms

Question 20

Equimarginal principle

Answer 20

1 optimal pollution, ie last unit abated equals marginal damage cost

2 marginal cost of last abated unit is the same for all regulated agents

Question 21

Goal vs policy vs action

Answer 21

Goal is what aim to achieve
Policy is the law or actions of gov to meet goals
Action is taken by different actors to accomplish goal

Question 22

Policy criteria

Answer 22

1) effective?
2) efficient?
3) equality?
4) simplicity?
5) acceptable?

Question 23

Voluntarism

Answer 23

No regulation, voluntary internalization of externalities
Eg house hold energy auditis

Simple and politically acceptable

Inefficient, inequitable, not very affective

Question 24

Assign property rights?

Pollution efficiency

Answer 24

Works when simple,

Simple, effective, efficient and acceptable, sometimes not equitable

Question 25

Why are fisheries hard to manage?

Answer 25

1 ecological complexity
2 public and political acceptability
3 market failure of common pool

Question 26

Bio economic model of fisheries

Answer 26

Start with simple biological model

Define assumptions and limiations

Question 27

How do we regulate fisheries?

Answer 27

1) open access regulations
- tech restrictions
- size and weight limits

2) limited entry regulations
- ITQs
- fish coops

Question 28

Types of rent

Answer 28

Scarcity rent

Differential rent

Question 29

Government rent capture?

Answer 29

Government tried to capture rent from resource depletion

Question 30

Absolute advantage

Answer 30

With same inputs, country can produce more outputs than another country

Question 31

Comparitive advantage

Answer 31

When opp cost id producing something is less for one country realitive to others