In this module, the way economists think about whether an outcome is good is explored and some of the features of natural resources and environmental quality that often trigger problematic human behaviors related to the environment are described.
Learning objectives
After reading this module, students should be able to
- know how economists define environmental outcomes that make society as well off as possible.
- understand what externalities are, and how they can lead to outcomes with too much pollution and resource exploitation.
- be able to define public goods and common-property resources, and understand how those things are prone to under-provision and over-exploitation, respectively.
Introduction
To identify and solve environmental problems, we need to understand what situations are actually problems (somehow formally defined) and what circumstances and behaviors cause them. We might think that it is easy to recognize a problem—pollution is bad, saving natural resources is good. However, critical thinking often reveals snap judgments to be overly simplistic. Some examples help to illustrate this point.
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Running out! Oil is a depletable resource, and many people worry that rapid extraction and use of oil might cause us to run out. But would it really be a bad thing to use up all the oil as long as we developed alternative energy technologies to which we could turn when the oil was gone? Is there any intrinsic value to keeping a stock of oil unused in the ground? Running out of oil someday may not be a problem. However, subsidies for oil extraction might cause us to run out more quickly than is socially optimal. Other inefficiencies arise if multiple companies own wells that tap the same pool of oil, and each ends up racing to extract the oil before the others can take it away—that kind of race can increase total pumping costs and reduce the total amount of oil that can be gleaned from the pool.
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Biological pollution! Horror stories abound in the news about the havoc raised by some nonnative animal and plant species in the United States. Zebra mussels clog boats and industrial pipes, yellow star thistle is toxic to horses and reduces native biodiversity in the American West, and the emerald ash borer kills ash trees as it marches across the landscape. From the current tone of much media and scientific discourse about nonnative species, one could conclude that all nonnative species are problems. But does that mean we should forbid farmers in the U.S from growing watermelons, which come from Africa? Or should we ship all the ring-necked pheasants back to Eurasia whence they originally came, and tell North Dakota to choose a new state bird? The costs and benefits of nonnative species vary greatly – one policy approach is not likely to apply well to them all.
This section first explains the way economists think about whether an outcome is good. Then it describes some of the features of natural resources and environmental quality that often trigger problematic human behaviors related to the environment.
