EEP 101/ ECON 125 Economics of Resources and the Environment

Professor David Zilberman Department of Agricultural and Resource Economics University of California, Berkeley

Lecture 1: Introduction
The Instructors GSIs Sections Readings (Online Texts) Grading Course Outline What You Will Study, Hopefully Special Issues Details available on the syllabus and online on the class website: (https://bspace.berkeley.edu)

The Instructors
David Zilberman
Office Location: 337 Giannini Hall Office Hours: Thursdays, 2:30-3:30 pm Website: professorzilberman.com Email: zilber11@berkeley.edu

GSIs
Geoffrey Barrows
geoffrey.barrows@gmail.com

Lilia Chaidez
chaidezlilia@berkeley.edu

Abu Nayeem
abu@berkeley.edu

The Professor

Background of Zilber
Originally from Israel (you can tell by his Zilbonic accent). Works on water in California (got a Drippey Award, the Oscar of Plumbing (come see the wax trophy in his office). Expert on biotechnology, environmental services, and pesticides (always attracted to toxic materials and never shies from controversy). Basketball fanatic (has season tickets to Warriors games).

Sections
Section 1: Monday 9-10am, 2066 VLSB (Lilia) Section 2: Monday 8-9am, 2032 VLSB (Lilia) Section 3: Wednesday 9-10am, 2062 VLSB (Geoff)

Section 4: Wednesday 3-4pm, 2038 VLSB (Geoff)

Section 5: Friday 1-2pm, 2066 VLSB (Abu)

Section 6: Friday 3-4pm, 2030 VLSB (Abu)

Readings (Online Texts)

There is no required textbook. The detailed course notes will be on https://bspace.berkeley.edu. For supplementary readings, we recommend the textbooks listed on the syllabus. Lecture summaries will also be available at https://bspace.berkeley.edu. The detailed notes and lecture summaries will be modified to reflect the revised content of the class.

Grading
Grading 30% midterm, 50% final, and 20% homework. Students may opt to submit a paper. In this case grading is 66% classwork (the above) and 34% for the paper.*

* Possible topics for the optional paper, in addition to sample papers, can be found on bspace after the midterm.

Optional paper
The optional paper should be 10-15 pages long. Should address environmental issues, providing an economic perspective. The format should follow a policy memo.

Course Outline
The syllabus includes a class outline revealing the materials to be covered in each outline.

The first five lectures are as follows:

Lecture 1: Introduction (Today!) Lecture 2: When Is a Market Socially Optimal? Lectures 3: Welfare Economics Lecture 4: Negative Externalities Lecture 5: Externality Policies

What You Will Study, Hopefully

Theory of externalities
How to use carrots & sticks to reduce pollution The political economy of pollution control

Public goods
The economics of parks and environmental amenities Collective actions for a greener world

Evaluation of nonmarket benefits Resource management over time

Conservation policies Sustainability

Special Issues
Water Climate Change Pesticides Biotechnology Environmental Services Biofuel

Examples of topics
The impacts of overpopulation The economics of the Clean Water Act Energy in China Pesticide contamination in groundwater The economics of oil prices Animal waste: How much is too much? The Kyoto Protocol The decline of the fish population The three Gorges Dam Projects: Benefit for the future of uncalculated risk?

List of Course Resources

Course readings Exam materials Lecture presentations Optional paper Problem sets Related readings Section notes Syllabus

Some Overview Material

Interdisciplinary and multidisciplinary research Evolution of disciplines Economics Public policy research Choices of policy intervention Examples

Interdisciplinary vs. Multidisciplinary

Interdisciplinary: Integrated approach. Biological and physical concepts are introduced to risk-analysis frameworks. Multidisciplinary: Work in parallel. Several disciplines analyze a problem with some interaction, e.g., National Research Council or U.N. task force.

Interdisciplinarity Is Relative
Interdisciplinary research varies. Includes: - Collaboration between a soil physicist and soil chemist working on soil performance. - Integration of economics, physics, and biology applied to climate change. It is useful to distinguish between interdisciplinary research within a major branch of science and between branches of science.

Evolution of Disciplines
Major problems or discoveries (DNA) begot disciplines. Computer science and chemical engineering are new disciplines, and astrology is a dead one. Disciplines are born, merge, and die.
Conflict within a discipline

Integration of methods
A discipline is born

New complex problems

Lack of excitement

A discipline dies

People May Embody Interdisciplinary Approaches

Reality does not know disciplinary borders. New solutions may integrate disciplinary approaches.
Pest control theory merges economics with biology Management, law, and policy integrate decision theory sciences with natural sciences. Geography is interdisciplinary in nature.

Science grows when methods are imported between disciplines.

Social sciences and biology are revitalized by mathematics.

Interdisciplinarity leads to new disciplines.

Multidisciplinary Education form Interdisciplinary People

Exposure to several disciplines leads to flexible creative thinking and expands opportunities. Almost all scientists need math and computer skills. A scientist needs exposure to decision theory.
May become a manager Is challenged to make socially meaningful discoveries

Social criticism needs a sound science base.

Economics
Studies resource allocation Has several approaches:
Behavioral Institutional Positive theory Normative theory Econometric

Micro vs. Macro

Micro-behavior of consumers and firms and the resulting market outcomes. Issues:
Prices and quantities of goods Consumer and producer welfare Impact of market regulations Monopolies and imperfect competition

Macro-aggregate behavior of the overall economy:

Unemployment and inflation Money and interest rates Investments and savings

International trade:
Tariffs and barriers to trade International agreements

Interdisciplinary Elements in Economics

Analyzes resource allocation. Emphasizes:

(Every Discipline Has Some Interdisciplinary )

Explaining reality and suggesting policies. Markets, money, and new institutions Rationality is an important assumption now being challenged by developments in field of psychology

Borrows heavily from math and statistics. Has strong applied subfields. Can be used an an integrating discipline in policymaking.

What Is Public Policy Research?

Analysis of government activities in various areas pragmatic, applied, interdisciplinary. Borrows much from public economics
Market failureissues of environment cannot be solved by the market; intervention is needed. Even when markets income distribution may be undesirable.

Needs to design interventions to clean the environment and improve income distribution at low costthat is the policy challenge.

 Analysis of behavior and outcomes

Crop choice Adoption of new technologies Agricultural prices Consumer attitude and demand

Economic Applications to Agriculture

Policy impact assessment

Impacts of agricultural and environmental policies Impacts of new technologies

Policy design
Incentive to conserve More efficient innovation strategies

Policy Research Is Interdisciplinary

Policy research combines real-world problems with methodologies from economics, math, etc. Policy design requires understanding people and politics. Needs to know technical options; then consider solutions. Can lead to interaction with policymakers. Economics is frequently the integrating discipline.

Risk Assessment and Policy (Pesticides)

Risk to health from chemicals is the outcome of
Application Transfer Exposure Vulnerability

Research to design policy involves

Agronomy Hydrology Epidemiology/toxicology Economics

Policy interventions include

Control of application (standards or incentives) Protective clothing Medical arrangement

Policy Research Has Many Dimensions

Theoretical: Search for secrets to successful policies, optimizing design under constraints of science and society. Institutional: Studies specific institutional design, e. g., tradable trading and international agreements. Empirical: Search for data emphasizing quantitative impact assessments. Political economic: Explains why policies are selected.

Policy research emphasizes practicality.

Does not aim to find best policy, but the best policy possible and sometimes looks for improvement.

Policy Analysts Consider the Nasty Details

Do not only study policy design, but also implementation
Monitoring Enforcement

Case studies-key approach Analyzes why policies succeed and fail. Examines what was ignored in policy makingis it bad science or bad design? Reality is their lab; they change agenda as problems change.

A good policy is key for economic and environmental well-being.

Economic welfare and environmental sustainability cannot be attained without interdisciplinary knowledge to undertake policy action