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Production, Growth, and the Environment
An Economic Approach





ISBN 9781138075092
Published March 30, 2017 by CRC Press
360 Pages 89 B/W Illustrations

 
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Book Description

Written in a way that facilitates understanding of complex concepts, laws, and policy, Production, Growth, and the Environment: An Economic Approach explores how economic growth usually makes people better off, but also asks at what environmental cost? These costs are not often realized until after the fact, when their remediation is more expensive, and sometimes not reversible. Very few books on environmental economics model the joint production of desirable and undesirable outcomes in any depth. This book fills that void. It discusses the demographic transition and the escape from the Malthusian trap. It also covers the environmental Kuznets curve hypothesis that examines the relation between polluting outputs and economic welfare.

The book integrates environmental valuation methods with the production possibility frontier (PPF) approach. It presents both types of outcomes in a PPF framework that accounts for scarcity and allows the concepts of technical and allocative efficiencies to be introduced and measured. The PPF can then measure technological progress/regress and can be used to measure whether resource use is sustainable over time. It can also be used to determine shadow prices for non-market desirable outputs such as ecological services and non-market undesirable by-products such as SO2, NOx, and CO2 that arise from fossil fuel combustion.

The beauty of the PPF framework is that it can be depicted in simple two-dimensional diagrams that make the concepts easy to understand. The author uses this framework to introduce concepts such as technical efficiency, allocative efficiency, technological progress/regress, shadow pricing, externalities, public goods, pollution taxes, and permits. In addition, each chapter has numerous problems and discussion questions that provide examples and practice in using the introduced theories. The book also includes a chapter that shows how the solver routine in Excel can be used to measure technical and allocative efficiency. This gives you the tools to examine all outcomes and therefore make a decision that takes into account the environmental challenges along with any economic benefits.

Table of Contents

Introduction
Economic Growth and the Environment
Brief History of Environmental Economics
Tragedy of the Commons
Scarcity and the Laws of Thermodynamics
Circular Flow of Income and Spending
Evaluating Environmental Policy
Efficiency, Equity, Growth, Stability, and Flexibility
"Law" of Unintended Consequences
Limits to the Economic Approach
Questions to Ponder

Review of Microeconomic Tools
Markets and Prices
Utility Theory
Demand
Supply
Trade Creates Value
Technical Note on Consumer’s Surplus
Changes in Demand and Supply
Returns to Scale
Equal Marginal Cost Principle
Pareto Efficiency and Equity
Problems

Indicators of Environmental and Economic Well-Being
Policies and Instruments
Cancer
Life Expectancy
Grain Yields
Solid Waste
Oil Spills and Water Quality
Air Pollution
Carbon and Chlorofluorocarbon Emissions
Questions to Ponder

Economic Growth and the Environment
Malthusian Trap
Escape from the Malthusian Equilibrium
Demographic Transition
Stages of Economic Development
Environmental Kuznets Curve Hypothesis
Dynamic EKC Models
Environmental Justice
Race to the Bottom?
Problems

Joint Production of Desirable and Undesirable Outputs
Production Possibilities with Two Desirable Outputs
Production with Desirable and Undesirable Outputs
Theory
View of the Two Koreas at Night
Technical Efficiency
Technical Efficiency with Two Desirable Outputs
Technical Efficiency with Desirable and Undesirable Outputs
Allocative Efficiency
Two Desirable Outputs
Allocative Efficiency with a Desirable and Undesirable Output
Input Allocative Efficiency
Productivity Change
Productivity Change with Desirable Outputs
Productivity Change with Desirable and Undesirable Outputs
Aggregate Production Possibilities Frontier
Regulated Production Possibilities
Sustainability
Problems

Estimating Environmental Performance
Data Envelopment Analysis
DEA Reference Technology
DEA with Desirable Outputs and Inputs
DEA with Undesirable Outputs
Measuring Efficiency Using DEA
Output Distance Function
Technical Efficiency with Undesirable Outputs
Using Excel to Estimate Technical Efficiency
Revenue Efficiency
Limits of the DEA Approach
Problems

Public Goods and Bads
Characteristics of Public Goods and Bads
Efficiency Conditions for Public Goods and Bads
Political Process and Lindahl Equilibrium
Fiscal Federalism
Dominant Assurance Contracts
Climate as a Public Good
Questions and Problems

Externalities and Common Property Resources
Is the Price Right?
Trade with Spillover Costs and Benefits
Efficiency in the Presence of Externalities
Common Property Resources
Internalizing Externalities through Taxes and Subsidies
Using Property Rights to Internalize External Costs and Benefits
Uncertainty and the Choice between Taxes and Permits
Negotiation and Bargaining
Social Contract
Pigouvian Tax to Reduce Global Warming
Regional Differences in the Damages of Pollution
Problems

Valuing Environmental Resources
Introduction
Travel Cost Approach
Hedonic Price Approach
Compensating Wage Differentials and Hedonic Wages
Weak Complementarity Approach
Contingent Valuation Method
Shadow Pricing
Valuing Nonmarket Outputs
Valuing Un-priced Inputs
Problems

Endangered Species
Introduction
Unintended Consequences of the ESA
Economics and Endangered Species
Noah’s Ark Problem
Habitat Protection
CITES
Choosing Distinctive Sites
Problems and Questions to Ponder

Interest Rates, Cost–Benefit Analysis, and Nonrenewable Resources
Rate of Time Preference
Time Value of Money
Social Rate of Discount
Do Biofuels Pass the Cost–Benefit Test?
Hyperbolic Discounting
Resource Extraction
Trends in Nonrenewable Resource Prices
Problems

Renewable Resources
Not Enough Fish in the Sea
Bioeconomic Fishery Model
Biological Growth Functions
Static Bioeconomic Equilibrium
Aspects of Dynamic Bioeconomic Equilibrium
Policies to Reduce Overfishing
Two Examples of Overexploitation: Whales and Buffalo
Whales
Buffalo
Forest Resources
Problems

Transaction Costs and Institutional Choice
Introduction
Transaction Costs
Transaction Costs of Using the Market
Transaction Costs of Using Government
Private Market Failure
Nonmarket Failure
Private Property Rights
Water Rights
Institutional Choice
Summing Up
Questions

Retrospect and Future Prospects
Retrospect
Future Prospects
Conclusion
Bibliography
Answers to Selected End of Chapter Questions


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Reviews

"I strongly recommend Production, Growth, and the Environment: An Economic Approach as a useful textbook for professors who teach the courses such as environmental economics and ecological economics. This textbook introduces a production possibility frontier framework, which accounts for undesirable (bad) outputs as joint by-products of desirable (good) outputs. This framework allows one to gauge technical efficiency, allocative efficiency, technological change, and shadow prices of bad outputs. Students can learn how the measures of technical and allocative efficiency can be calculated by using the solver routine in EXCEL. Furthermore, numerous examples and questions help students learn how to apply the theory to environmental and ecological issues and problems. Therefore, this is an excellent textbook for junior/senior college students and graduate students who would like to learn environmental economics and environmental science."
—Hirofumi Fukuyama, Faculty of Commerce, Fukuoka University, Japan

"The topics covered in Production, Growth, and the Environment: An Economic Approach reflect Professor Weber’s expertise and interests in public economics, production theory, performance in general and especially in the presence of externalities and always as a highly skilled applied economist. This volume is distinguished from the many textbooks in environmental economics by explicitly including state of the art frontier methods of performance measurement when production results in undesirable byproducts—an area in which he has published extensively. This book makes this new material accessible—including real world data and easy to use spreadsheet code and problems, which should prove useful for instructor and students alike."
—Shawna Grosskopf, Professor Emerita, Oregon State University, Corvallis, USA

"This book manages to ground a series of timely and compelling environmental problems in rigorous economic theory, in a way that is fresh and engaging. It also provides a much needed production-oriented perspective. This would be an ideal text to use in an advanced undergraduate or master’s level course. The numerous well-developed numerical examples and exercise problems also make this an excellent teaching resource."
—Moriah Bostian, Lewis & Clark College