Environmental and Natural Resource Economics

Peter J. Wilcoxen
Department of Economics
The University of Texas at Austin

Preliminary Course Outline

Here is a tentative list of the topics to be covered in class this semester. Depending on the background and interests of the class we may cover more material or cover it in a slightly different order.

Fundamental Concepts

1. Basic ideas from microeconomics
2. What can lead to inefficiency?
3. Efficiency over longer periods
   
   

Controlling Externalities

1. Basic principles
   • The Coase critique
   • Command and control regulation
     • Example: US criteria air pollution regulations
   • Market based methods
2. Measuring the value of the environment
   • Contingent valuation
   • Hedonic pricing
   • Travel cost
   • Health effects and risk assessment
3. Further complications
   • Jurisdiction: local vs national vs international control
     • Transboundary pollution
     • Global externalities: ozone, CO2
     • Pollution havens
   • Priorities: toxic and hazardous waste; Superfund
     
     

Managing Common Property

1. Introduction to natural resources
   • Types of resources
   • Uncertainty about stocks
   • USGS classification system
   • The reserve ratio fallacy
2. Basic model of exhaustible resource use
   • Constant costs and known supply
   • Current consumption creates externalities
   • Conditions for efficiency over time
   • Royalties, marginal user cost and marginal extraction cost
   • The link to the interest rate
   • Futures markets
3. Extensions to the basic model
   • Backstops
   • Increasing costs
   • Monopolies
   • Cartels
   • New discoveries
   • Exploration
   • Technical change
   • Shifts in demand
4. Recycling
5. Resource scarcity
   • Energy security
6. Environmental amenities
7. Renewable resources
   • Fishing
   • Water
     
     

Conclusion

1. When is intervention needed?
2. What form should it take?