Quiz 2 Flashcards
Characteristics of private and public goods
Private Goods: Characterized by Excludability: other people can be excluded from using or
benefiting from private goods.
Societies provide for the protection of private property rights.
Public Good
Characterized by:
Non-excludability
Non-rivalry of consumption: consumption of the good does generally not affect its
value.
Basic problem: Uncontrolled use of the public good for private gain will eventually
lead to overuse and degradation of the public good.
policy implications of the free rider problem
Free riders profit from improvements in the public good without contributing to it.
This has the following basic effect:
- Voluntarism to provide a public good has its limits!
- Public policy must address the free rider problem!
value/belief systems
Ideology, culture, nationalism, religion, identity are powerful
social constructs through which individuals and societies perceive
reality and determine what is in their interest.
American core values:
Personal freedom, free markets, democracy,
human rights, individualism, economic growth
how are value or belief systems formed and changed?
- Upbringing and culture
- Changing existing believes and value systems: Comm,framing,
- Learning task place through info processing
how we process information
We use established routines to:
- Reduce complexity
- Interpret information
what do we do when information is inconsistent with our beliefs
- adjust believes to incorporate new info
- discard info
role of science
Two arguments are often advanced to undermine scientific claims making:
Uncertainty about cause-effect relationships
Motivation of scientists
Role of the Media
Media news coverage tends to be event-driven and problem-specific, and tends
to de-contextualize events. Little room for presenting complex and long-term
issues.
Objectivity and balance: the need to appear objective and balanced often leads
to presenting two view points, even if one of them is held only be a small
minority.
Entertainment oriented: conflict and controversy gets ratings and
subscriptions. Celebrities are used as figure heads. “Human-interest” stories
dominate.
News cycle: public becomes disinterested, even if the problem remains the same.
basic understanding of the advantages/disadvantages of a regulatory policy approach
The government sets specific binding standards and enforces compliance
by law.
Advantage:
- Clear benchmarks create level playing field for private sector
- Compliance costs can be calculated
- Regulation often creates side-benefits
Disadvantages:
- Inflexible: incentive structure is to avoid compliance
- No incentive to go beyond standards
- No effect on demand for polluting activity
- Expensive to monitor and enforce
- Special interest bargaining leads to second-best solutions
basic understanding of the advantages/disadvantages of a market-based policy approach
Basic idea: integrate environmental costs into the price of goods and services
and than let market forces play. This requires the use of taxes, fees and similar
instruments.
Advantage:
- Flexible, does not require regulatory framework
- Allows firms to use most cost-effective approaches to reduce exposure to tax
- Can be phased in slowly, shadow of the future creates market signals.
- Can directly target demand for polluting activity.
- Can generate revenues that can be used for offsetting other taxes
(eco-tax reform, revenue neutrality) or
- provide resources for subsidizing environmental technology and conservation.
Disadvantages:
- Political acceptability low in the U.S. (no interest-group politics)
- Regressive: without countervailing measures, lower income groups may pay
higher share
- Consumers may have no alternatives but to pay higher price.
- Response to price signal may only set in at prohibitively high price levels
(price elasticity)
value judgements that go into risk assessment and management
Risk assessment in practice requires many judgment calls
Three key problems:
- what substances to assess (toxic waste rather than newly released
substances)
- what effects to assess (focus on cancer and less on other health effects)
- what are acceptable risks (how much should risks be reduced at what costs)
What a society sees as an “acceptable risk” is a social construction.
EPA’s track record in monitoring and regulating chemicals
In July 2005 the Government Accountability Office (GAO) – an independent
government agency – charged that the U.S. Environmental Protection Agency is failing
to protect the public from tens of thousands of toxic compounds because it has
not gathered data on the health risks of most industrial chemicals. The report found that
chemical companies had provided health data to the EPA for only about 15% of some
80,000 chemicals that had been introduced over the past 30 years.
cost-benefit analysis (why does it bias against regulation?)
Value costs and benefits of using natural resources or the environment in
different ways.
Compare short-term benefits/costs with long-term benefits/costs.
President Ronald Reagan in 1981 issues an Executive Order to subject all
government regulations to cost-benefit analysis (except military
expenditures)
How useful is cost-benefit analysis?
Benefit-cost analysis can help
- set priorities
- increases transparency
- Makes cost-effectiveness an issue
identify at least three criteria air pollutants (regulated under the clean air act)
- Lead
- Carbon dioxide
- Nitrogen Dioxide
