Announcements:

·        HW #4 key is here: HW4 W08.

·        HW #5 key is here: HW5 W08.

·        Final Exam key is here: Final Exam Winter 2008.

 

Natural Resource Economics

Economics 122/Env. Studies 179

 

Robert Deacon                                                                                               Winter 2008

 

TA office hours:      Ross Mohr, North Hall 3049; mohr@econ.ucsb.edu

                              F 1:00-2:00 & M 10:00-12:00; if Homework is due on a Thursday, he may switch M office hours to W (will announce in class).

Sections:                 F 9:00- 9:50, Bldg. 387 101

                              F 10:00-10:50, Bldg. 387 101

                              F 11:00-11:50, ARTS 1426

                             

Lectures:                  TTh 9:30-10:45, Theater/Dance 1701

My office hours:       Wed. 2:00-3:30; 3040 North Hall, deacon@econ.ucsb.edu.

Exams:                    Midterm: Tues. Feb. 12 (40%)
                    Final: Wed. March 19, 9:00-11:00 a.m. (40%)
                    (Homework problems count for the other 20%)
                    See the lecture schedule below for times of exam review sessions.

Course Description:

We will examine the operation of markets for natural resources, including minerals, fossil fuels, forest resources, and fisheries. We will also examine economic issues related to biodiversity and deforestation. Natural resource abundance is determined by physical processes and a general understanding of these processes is necessary for correct economic analysis. For this reason the study materials present biological models for fisheries and forests and incorporate geological concepts in examining minerals. Ownership rights to natural resources often are not clearly defined. In these cases the interests of some potential resource users will not be reflected in market outcomes and the scramble to acquire these un-owned assets may be wasteful. Finally, the use of natural resources is ultimately linked to the release of waste products into the environment, so there are considerations of environmental degradation. These themes appear at various points in the course.

Pre-requisites:

Intermediate microeconomics (Econ. 100A & B or Econ. 104A & B) is required. Two sets of concepts are used repeatedly: welfare economics (concepts of Pareto efficiency, externalities, and property rights) and intertemporal choice (interest rates, investment decisions, present value). These concepts will be reviewed briefly in class and in Section II of the readings, but the time spent will be minimal. Students who completed their intermediate microeconomics courses some time ago should review as needed.

Readings and Other Study Materials:

Readings for this course are available online, with links provided in this syllabus. It is important to read the material for a given section of the course prior to lecture. I have prepared .pdf files with the slides I use in lectures. Some of these give mathematical formulas, derivations, and models to be used in the course. Links to these materials also appear in the syllabus. I recommend that you print these materials and bring them to class to help you follow the lecture material and to assist in taking notes. These slides are considered part of the reading material for this course and cover some topics not treated in the readings, such as the Forestry section slides on ‘below cost’ timber sales. This material may be included on exams. Please read these materials before the corresponding lecture.

Exams, Homework Problems and Grading:

Exams. Exam dates and weights used in grading are listed above. Both exams will consist primarily of short essay/problem questions. Old exams, with sample answers, are available on line as study aids. (Midterm Exam Winter 2007, Final Exam Summer 2007). No make-up exams will be given.  Students who miss the midterm may substitute a term paper in its place. Please see me for term paper guidelines if you choose this option. 

Numerical grades will be assigned to your answers to exam questions and these correspond to letter grades. Here is an example of how it works. For a 15-point question, numerical grades of 13-15 correspond to letter grades of A- to A, numerical grades of 10-12 correspond to letter grades of B- to B+, and so forth. This correspondence between numerical and letter grades also applies to homework problems. Here is the grading scale used.

Homework problems. Homework problems are available online (homework problems) and will be collected and graded during the quarter. These are mandatory and performance on them constitutes 20% of the course grade. Homework problems will also give you practice answering the types of questions you will find on exams. If homework problems are submitted late, 5 points (out of 20) will be deducted for each day late including weekend days. I will drop your lowest homework grade when computing your grade for the course. Here is file containing some data for Homework problem #3 that will be useful.                                                                       

 

TOPIC OUTLINE, READINGS AND SLIDES

(Approximate schedule of lectures.)

I. Basic Facts and Concepts

(Introductory Slides)

Balsdon, E., and R. Deacon, "Economics of Exhaustible Resources,” International Encyclopedia of the Social and Behavioral Sciences, Orley Ashenfelter (editor for economics,) Elsevier Sciences Ltd., 2002.

A.V. Kneese, et al., "Economics of the Environment: A Materials Balance Approach", in Enthoven and Freeman, Pollution, Resources, and the Environment, Norton, 1973.

 

II. Welfare Economics, Benefit Cost Analysis and Intertemporal Choice

(Review slides)

T. Tietenberg, Environmental and Natural Resource Economics, 4th Ed.
Chapters 2, 3. (Tietenberg Chap. 2, Tietenberg Chap. 3)   Note: For further depth, review relevant sections of your intermediate microeconomics text, e.g., H. Varian, Intermediate Microeconomics 6th Ed., Chapters 10, 11, 32, 33.

 

III. Forest Resources

(Forest slides Deforestation slides)

R.T. Deacon, "The Simple Analytics of Forest Economics", in R.T. Deacon and M.B. Johnson, eds., Forestlands, Public and Private, Ballinger, 1986.

D. R. Leal, "Turning a Profit on Public Forests," PERC Policy Series: PS-4, Sept. 1995.

Sedjo, Roger A., and Daniel Botkin, 1997. "Using Forest Plantations to Spare Natural Forests." Environment Vol. 39, no. 10 (December), pp. 14-20.

P. E. Kauppi, et al “Returning forests analyzed with the forest identity” Proceedings of the National Academy of Sciences, Nov. 14, 2006. 17574-17579.

 

IV. Fisheries

(Fisheries slides)

Tietenberg, Environmental and Natural Resource Economics, 3rd Edition, Chapter 12, “Renewable Common-Property Resources: Fisheries and Other Species.”

Donald Leal, 2005. “Fishing for Wealth in Coastal Fisheries,” Property and Environment Research Center, Bozeman, MT.

 

V. Non-renewable Resources

(NRResources slides)

J.W. Griffin and H.B. Steele, Energy Economics and Policy, Chapter 3. "Criteria for Efficient Dynamic Resource Allocation."

Ian W. H. Parry and J. W. Anderson, 2005. “Petroleum: Energy Independence is Unrealistic,” Resources, Winter 2005, Resources for the Future.

Severen Borenstein, 2005. “ANWR Oil and the Price of Gasoline,”  Energy Notes, Vol. 3, Issue 2, June 2005, University of California Energy Institute.

 

VI. Biodiversity and Species Extinction

(Biodiversity Slides, Noah’s Ark)

Barry Field, 2005. “The Economics of Biodiversity Preservation.” Chapter 9 in Barry Field, Natural Resource Economics, Waveland Press.

R. T. Deacon and Paul Murphy, "The Structure of an Environmental Transaction: The Debt for Nature Swap", in Land Economics, Vol. 73(1) 1997.

 

VII. Water Resources (if time permits)

Tietenberg, Environmental and Natural Resource Economics, 3rd Ed. Chap. 9. (Not included in online readings.)

Anon, “Priceless”. Article on water use, Economist July 19, 2003.

 

VIII. Concluding comments

(Concluding slides)