Monday, July 30, 2012

How Should Environmental Economics Be Taught?

For reasons I can't explain, I will teaching Summer School starting next week.  This 6 week course will meet 4 hours a week and will cover most of the basics of environmental economics.  So, what does that mean?  This blog post will sketch out my vision.

Course Objectives and Prerequisites:

This course seeks to introduce students to the major ideas in natural resources and environmental economics. Emphasis is placed on designing incentives to protect the environment. The course will highlight the important role of “crunching” empirical data to test hypotheses about pollution’s causes and consequences. The course is open to all students who have completed a statistics course and have taken intermediate microeconomics or have received permission from the instructor.

There is no textbook for the course.  Instead, here is what we will do.  Under each topic, I offer a few random thoughts.

Topic One: What is Environmental Economics?

Kahn, Matthew.  Air Pollution in Cities

I start the course by distinguishing environmental economics from intermediate micro.  The key difference is incomplete markets, pervasive public goods, property rights issues and many different types of uncertainty. 

Topic Two: Does Economic Growth Damage the Environment?

  • Air pollution
  • Indoor air pollution
  • Water pollution
  • Greenhouse gas emissions
  • Why does the answer differ across indicators?

Dasgupta, Susmita, Benoit Laplante, Hua Wang, and David Wheeler. 2002. “Confronting the Environmental Kuznets Curve.” Journal of Economic Perspectives, 16(1): 147-168.
Key Indicators Chapter for Asian Development Bank Report 2012

This second topic immediately jumps into externalities and the micro-economics behind "green accounting".  How does capitalism "injure" the environment through scale, composition and technique effects.

Topic Three: Are We Running Out of Natural Resources?

  • Will the world run out of oil?
  • Will the world deplete all of the fish and farmland?
  • The economics of property rights and resource extraction

Wackernagel, Mathis, Niels B. Schulz, Diana Deumling, Alejandro Callejas Linares, Martin Jenkins, Valerie Kapos, Chad Monfreda, Jonathan Loh, Norman Myers, Richard Norgaard, and Jørgen Randers. 2002. “Tracking the Ecological Overshoot of the Human Economy.” Proceedings of the National Academy of Sciences, U.S.A., 99(14): 9266-9271.
Nordhaus, William D., Robert N. Stavins, and Martin L. Weitzman. 1992. “Lethal Model 2: The Limits to Growth Revisited.” Brookings Papers on Economic Activity, 23(2): 1-60.
Diamond, Jared and his critics;  “What is Your Consumption Factor?”

The class then detours to the limits to growth and natural resource consumption both for oil and fish.

Topic Four: Government and Environmental Protection

  • Why is government intervention required?
  • What is a pollution tax?
  • What is regulation?
  • The Economics of California’s AB32
  • National Policy:  The Clean Air Act

Hilton, F. G. Hank, and Arik Levinson. 1998. “Factoring the Environmental Kuznets Curve: Evidence from Automotive Lead Emissions.” Journal of Environmental Economics and Management, 35(2): 126-141.
Benefits and Costs of the Clean Air Act:

Kotchen, Matthew,  Energy Efficiency Codes;

This part of the course has a Chicago School of regulation feel as I discuss the benefits and costs of government regulation and focus on the unintended consequences of regulation and who bears the incidence of regulation.

Topic Five: Will “Green Markets” Green the Environment?

  • The demand for “green cities”
  • The demand for green products such as the Prius and solar panels
  • The supply of green products
  • What is the role for government?
  • What is the “rebound effect”?

Ambec, Stefan and Paul Lanoie, Does it Pay to Be Green? A Systematic Overview
Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.

Portney, Paul,  The (Not So) New Corporate Social Responsibility: An Empirical Perspective,

Zheng, Siqi & Kahn, Matthew E., 2008. "Land and residential property markets in a booming economy: New evidence from Beijing," Journal of Urban Economics, Elsevier, vol. 63(2), pages 743-757, March.

So, this is a "sexy topic" focused on whether the rise of the Prius and Solar panels and "green minded" consumers can truly "green" capitalism. 

Topic Six: Population

  • Quantity vs. quality of children and household fertility choice

Mammen, Kristin, and Christina Paxson. 2000. "Women's Work and Economic Development." Journal of Economic Perspectives, 14(4): 141–164.

This is my homage to Gary Becker and the economics of the family.  All environmental economists should know their labor economics because population growth plays a key role as a driver of many of the effects that interest us.  This topic allows me to talk about the developing world.

Topic Seven: The Economics of Climate Change Adaptation

Kahn, Climatopolis,

We will have already spoken about carbon taxes and climate change mitigation under government in Topic 5 so this last topic allows me to focus on my favorite issue of adaptation and to highlight the implicit optimism in modern economics about the positive role that capitalism plays in our life.

If your research paper isn't listed above, do not worry.  In class, I speak about dozens of studies and why I like them without requiring the students to read them.  If you audit my class, you can see for yourself that the students are learning and are actively engaged.  While I will never be "teacher of the year", I am trying.