ThemesinEnvironmentalPolicy.docVIP

Themes in Environmental Policy The Economic Perspective on Environmental Degradation Positive perspective – why there is excessive pollution; externalities lead to excess pollution; overconsumption of clean air Normative claim – goal is to maximize social welfare; only reduce pollution if it increases welfare of victims more than it costs polluters; optimal level of pollution; can consider distributional consequences but doesn’t have to Attitudinal perspective – pollution is rational response to economic incentives; not subject of moral opprobrium; failure of regulatory regime to show polluters the social cost of their pollution Hardin, Tragedy of the Commons Many ways to frame this issue: Tragedy of the commons – common pasture; every herder has incentive to add another animal – he gets the benefit but costs are shared with others; if all herders do this, pasture can’t support herd; Transaction costs might be too high for herders to reach private agreement to limit herd size Freerider – cannot exclude herder from using pasture; last person won’t agree because he can still get the benefit without the burden of limiting animals; first person won’t agree because might not get benefit but will bear burden Which communities will form agreements? Smaller; homogeneous; repeat players; pre-existing social relationship Prisoner’s dilemma – 2 herders can limit herd to L/2 or impose no limit If each limits ( they both get 10 If neither limit ( they both get 0 If one limits but not the other ( One gets 11 and the other gets -1 Each better off not limiting whatever the other does; get 11 instead of 10 if other limits; get 0 instead of -1 if other does not limit; but both worse off because each limiting has maximum total benefit Repeat players can overcome by building trust; tit for tat strategy; infinite game important or incentive unravels Logic of Collective Action – Public Goods – 2 characteristics Non-rival – one person’s use does not diminish value to other Non-excluda