Resource and Environmental Economics

Grinnell College
Grinnell, Iowa


Instructor: Montgomery, Mark
Subject area: Economics
Department: Economics
Course number: 240
Year taught: 1998
Level: Undergraduate

Please note that the copyright for this syllabus is retained by the instructor.


Overview: This course will expose students to a wide range of issues concerning how societies use the natural environment for economic purposes. In particular, we will show how special characteristics of natural resources cause markets to allocate them inefficiently. This is an economics class - its main purpose is to show how economists view environmental problems and look at the kinds of solutions they propose. For better or worse, mainstream economists are increasingly influential in formulating environmental policy. In this class we will apply economic theory from Economics 111 and learn some new theory along the way. However, the emphasis in this class will be on the application of analytical tools developed in introductory economics to issues of environmental policy. In all cases the primary focus will be the implications of economic analysis for the development of environmental policy.

OBJECTIVES OF THE COURSE: This course will expose students to a wide range of issues concerning how societies use the natural environment for economic purposes. In particular, we will show how special characteristics of natural resources cause markets to allocate them inefficiently. This is an economics class - its main purpose is to show how economists view environmental problems and look at the kinds of solutions they propose. For better or worse, mainstream economists are increasingly influential in formulating environmental policy. In this class we will apply economic theory from Economics 111 and learn some new theory along the way. However, the emphasis in this class will be on the application of analytical tools developed in introductory economics to issues of environmental policy. In all cases the primary focus will be the implications of economic analysis for the development of environmental policy.

REQUIRED READING: There are three books for this course: a main text, a book of readings and a supplemental paperback. The main text is Environmental Economics and Policy (second edition) by Tom Tietenberg (I'll call it "TT"). The book of readings is Economics of the Environment, Selected Readings by Robert and Nancy Dorfman ("D&D"). The supplemental paperback is Free Market Environmentalism by Terry L. Anderson and Donald R. Leal ("A&L"). Other readings will be handed out in class.


GRADING: Student performance will be evaluated on the basis of 2 midterm exams (25% each), a comprehensive final exam (30%), and a short (3-5 page) written assignment (20%). In addition, class participation will positively affect the grades of those students who are near grade boundaries.
COURSE OUTLINE
Week of Aug. 31
Review of theoretical concepts from Introductory Microeconomics.
Week of Aug. 31, Week of Sept. 7
Introduction to Environmental Economics. This is the basic framework of how economists view environmental problems.

Reading:
Chs. 1 & 2 in TT
Chs. 1 & 2 in A&L
Reading #2, "The Economic Common Sense of Pollution," in D&D.
Reading # 11, "Sustainability, an Economist's Perspective," in D&D
Week of Sept. 14
Property Rights, Externalities and Economic Efficiency. This section presents the theoretical core of the economists' view of why unrestrained markets will misallocate environmental resources.

Reading:
Ch. 3 in TT
Ch. 3 in AL (Handout)
Reading #8, "On Divergences Between Social Cost and Private Cost" in D&D
Week of Sept. 21
Valuing Environmental Resources. This section describes the primary tool by which policy makers analyze the desirability of environmental laws and projects. We also consider the a very controversial application of these ideas: placing a dollar value on human life.

Reading:
Ch. 4 in TT
Reading #18 "An Introduction to Benefit-Cost Analysis" in D&D
Reading #22 "The Economic Value of Life" in D&D
Reading #23 "The Life You Save may be Your Own" in D&D
Week of Sept. 28
Population Growth and Economic Growth. Many people consider the explosion of the human population to be the main source of environmental degradation.

Reading: Ch. 5 in TT.
Reading #1, "The Tragedy of the Commons," in D&D
"Population Growth is Not Bad for Humanity" by Julian Simon and
"The Population Factor" by Norman Myers in Scarcity or Abundance? A Debate on the Environment by Simon & Myers. (Handout)
Week of Oct. 5
Are We Running Out of Resources? An Overview of Resource Scarcity. Many people argue that our dependence on nonrenewable resources will soon result in worldwide catastrophe. Others consider this view nonsense.

Reading:
Ch. 6 in TT
Chs. 4 & 5 in A&L.
Week of Oct. 12
The Energy Problem (if there is one):

Reading:
Ch. 7 in TT
Ch. 7 in A&L.
Ch. 5, "America's First Oil Crisis," and Ch. 6, "An English Energy Crisis," in C. Maurice and C.W. Smithson, The Doomsday Myth. (Handout)
Week of Oct. 26
The Use of Renewable Resources, Part 1: Food. There is a lot of hunger. Is it because there isn't enough food?

Reading:
Ch. 9 in TT
Reading # 29 "Adverse Consequences of the Green Revolution" in D&D
Week of Nov. 2
Renewable Resources, Part 2: Forests.

Reading:
Ch. 10 in TT
Ch. 6 in A&L
Week of Nov. 9
Renewable Resources, Part 3: Fish (and other wildlife).

Reading
Ch. 11 in TT
Reading #6 "The Economic Theory of a Common Property Resource: the Fishery" in D&D.
Week of Nov. 16
Pollution. This is probably the area of environmental policy in which economists have been the most influential.

Reading:
Ch. 12 & 13 in TT
Chapter 10 in A&L
Richard Schmalansee, et. al. "An interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, Summer 98 (handout)
Week of Nov. 23, Week of Nov. 30
Global Warming. A biggy.

Reading:
Ch. 11 in A&L
Reading #27 "Some Economics of Global Warming" in D&D
Reading #28 "Economic Activity and the Greenhouse Effect" in D&D
Week of Nov. 30
Toxic Substances. An area in which there is an enormous amount of government regulation. (If we run short on time, This topic will be jettisoned.)

Reading:
Ch. 18 in TT
Reading #24 "Risk Assessment and Comparisons. . ." in D&D
Reading # 16 "Economic Incentives in the Management of Hazardous Waste" in D&D
Week of Dec. 7
Development and the Environment. Should LDC's develop the way the industrialized countries did?

Reading:
Chs. 19 & 20. TT
Ch. 17 in James R. Kahn, The Economic Approach to Environmental and Natural Resources (Handout)