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Definition
| The negative or positive effect of a person's or institution's actions, who doesn't experience the full benefits or costs themselves. |
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Term
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Definition
| Also known as pareto efficient, is an exchange outcome which makes one party better off without making others worse off. If markets are maxmizing efficiency, this means the market is allocating goods in such a way so that the equilibrium is pareto efficient and total social surplus is delivered. |
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| Positive Externality Example |
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Definition
| A beekeeper takes care of bees and harvests their honey. A side effect of this activity is the pollination of surrounding crops thanks to the bees. |
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| Negative Externality Example |
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Definition
| Pollution from factories damages crops, buildings, public health. Harvesting by a fish company depletes stock available to other companies (overfishing). |
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Term
| Type of Good Lighthouses Provide |
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Definition
| Unless some type of port fee is charged to boaters, a lighthouse is a public good because there is no cost to an additional user of the good and people aren't required to pay to utilize it. The market isn't expected to deliver the efficient number of lighthouses because it is difficult to maximize efficiency on ports less traveled than others. Although they are public goods, lighthouses are often privately owned, and if they were provided with some sort of incentive for building, they may put lighthouses in locations in which they would be used most. |
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Definition
| Shows the present value of future net benefit that is lost due to the use of the resource at present, or the opportunity cost of extracting an additional unit of resource today. Arises due to the scarcity of the exhaustible resource and as such it is often called scarcity rent. |
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Term
| Economic Theories for Solution to Sustainability Problem |
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Definition
1.) Nonrenewable resources are used while the economy transitions into a backstop resource or technology to be used instead.
2.) The rents earned from the use of nonrenewable resources be invested into assets that will substitute new productivity to cover the reductions in nonrenewable inputs. |
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Term
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Definition
Derived from actively engaging with the resource (waterskiing, fishing).
Consumptive and nonconsumptive. |
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Term
| Why is it difficult for firms experiencing decling marginal costs to stay in business? |
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Definition
| Total costs will exceed total revenue when marginal cost and marginal benefits are simultaneously declining. |
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Term
| Public Visits Benefits Schedule |
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Definition
Total costs=total benefits is the equlibrium number of visits.
MB=MC is the efficent number of visits. |
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Term
| Examples of externalities caused by extraction of renewable/nonrenewable resources |
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Definition
| Extracting nonrenewable resources can be the overfishing of a certain population in a river. This can cause externalities of decreaesed nonconsumptive values for the people living by the river, and also a possible externality of making the species threatened. This can be remedied by placing limits or regulations on the amount of fish that can be caught. |
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Term
| Criticisms of Contingent Valuation Method |
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Definition
Questions of the survey are completely hypothetical and may not represent an actual situation that has or will occur.
People may have a poor understanding of the issue and there is a low response rate because only the people who care about it respond. |
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Term
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Definition
The marginal value of the species, or the value of one more organism to a species.
Reflective of the marginal benefits and/or damages incurred by the species. |
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Term
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Definition
Non-excludable and non-rivalrous.
(No one can be excluded from using the good and one person's use doesn't deplete another's opportunity to use it.) |
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Term
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Definition
Says allocate property rights and people will negotiate until efficient level of production/consumption is reached.
With well-defined property rights and costless bargaining, negotiations between parties will bring about the socially efficient level. |
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Term
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Definition
| Present value refers to the worth of something to a person today after it has been discounted for the future. |
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Term
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Definition
derived from a resource without actually experiencing it.
Existence, option, bequest |
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Definition
extractive (fishing)
rivalrous good |
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Term
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Definition
| do not require resource to be diminished, akin to public goods (hiking) |
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Term
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Definition
| you enjoy the knowledge that the resource exists |
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Term
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Definition
| you want the resource to exist so that you have the possibility of experiencing/getting use value from it in the future. |
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Term
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Definition
| you want the resource to exist so future generations can enjoy it |
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Term
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Definition
Revealed Preference
Direct Price Analysis
Indirect Price Analysis
Hedonic Method
Travel Cost Method |
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Term
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Definition
| preferences of consumers can be revealed by their purchasing habits |
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Term
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Definition
| use observed market prices to value a resource (streamfishing) |
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Term
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Definition
use prices of complimentary goods to "back out" use value of resource
Two types: hedonic method and travel cost method |
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Term
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Definition
| estimates economic values for ecosystem or environmental services that directly affect market prices. Most commonly applied to variations in housing prices that reflect value of local environmental attributes. |
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Term
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Definition
| akin to price of consuming good/getting the use value from the resource |
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Term
| Contingent Valuation Method |
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Definition
| ask people how much they value something |
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Term
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Definition
| the amount of social surplus lost due to forgone transactions or trades |
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Term
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Definition
Free-riding.
private provision is inefficient because someone's private provision "crowds out" other private provision
People's incentives to contribute decline as provision is increased |
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Term
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Definition
presupposes use
the protection and management of resources for use of people |
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Term
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Definition
| there should be no development of the resource (land untouched by people) |
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Term
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Definition
| comparison of costs/benefits of public projects to determine whether they should be (or should have been) undertaken. |
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Term
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Definition
| technologies available that can utilize other resources to do similar jobs |
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Term
| Maximum Sustainable Yield |
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Definition
| max amount one can yield without depleting the resource |
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Term
| Gordon Model (bullet points) |
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Definition
- the farther the TC line is from the top of the curve, more efficient it is to regulate. Greater room/chance for extracting rents to cover costs
- regulate with tax (less monitoring required)
- as effort increases, stock decreases (overfishing)
- no rent generated in open access situation
- not efficient to increase the carrying capacity
- efficient: maximize rents, which is distance between TR and TC
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Term
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Definition
- anyone can come in and start fishing
- your access to resource does not stop another's access (not excludable)
- staking out a fish does deplete resource (rivalrous)
- if we wanted to regulate, use tax as opposed to command and control to create revenue (or rents), where command and control increases costs all around
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Term
| Externalities of Open Access |
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Definition
- too many entrants
- each entrant will overfish: ignore renewable nature of resource
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