Monday, January 08, 2007

New Year Reading: Democracy, Endangered Species and Uncertainty

Here are three rather eclectic working papers that appear at first glance to be of interest (certainly to me). I hope to get round to reading them this week so I cannot vouch for the quality although the List paper is bound to be interesting almost be definition.

On the Link Between Democracy and Environment
Date: 2006-12
By: Drosdowski, Thomas

Using a considerable number of theoretical and empirical sources, we analyze the relationship between democracy and environment. First, we compare the situation in democracies and non-democracies. Later, we discuss environmental distribution conflicts and the role of economic growth. In addition, we illuminate the way in which democratization influences environmental policies, concentrating on the role of economic inequality. Moreover, we discuss the impact of electoral rules and systems, as well as polluting lobbies. Finally, we consider political alternatives and sum up the main conclusions.
Keywords: democracy, environmental policy, political economy
JEL: D72 Q56 Q58

Is the Endangered Species Act Endangering Species?
Date: 2006-12
By: John A. List
Michael Margolis
Daniel E. Osgood


We develop theory and present a suite of theoretically consistent empirical measures to explore the extent to which market intervention inadvertently alters resource allocation in a sequentialmove principal/agent game. We showcase our approach empirically by exploring the extent to which the U.S. Endangered Species Act has altered land development patterns. We report evidence indicating significant acceleration of development directly after each of several events deemed likely to raise fears among owners of habitat land. Our preferred estimate suggests an overall acceleration of land development by roughly one year. We also find from complementary hedonic regression models that habitat parcels declined in value when the habitat map was published, which is consistent with our estimates of the degree of preemption. These results have clear implications for policymakers, who continue to discuss alternative regulatory frameworks for species preservation. More generally, our modeling strategies can be widely applied -- from any particular economic environment that has a sequential-move nature to the narrower case of the political economy of regulation.
JEL: H23 H41

Uncertainty In Environmental Economics
Date: 2006-12
By: Robert S. Pindyck


In a world of certainty, the design of environmental policy is relatively straightforward, and boils down to maximizing the present value of the flow of social benefits minus costs. But the real world is one of considerable uncertainty -- over the physical and ecological impact of pollution, over the economic costs and benefits of reducing it, and over the discount rates that should be used to compute present values. The implications of uncertainty are complicated by the fact that most environmental policy problems involve highly nonlinear damage functions, important irreversibilities, and long time horizons. Correctly incorporating uncertainty in policy design is therefore one of the more interesting and important research areas in environmental economics. This paper offers no easy formulas or solutions for treating uncertainty -- to my knowledge, none exist. Instead, I try to clarify the ways in which various kinds of uncertainties will affect optimal policy design, and summarize what we know and don't know about the problem.
JEL: D81 L51 Q28

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