An overview of resource economics

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8 Νοε 2013 (πριν από 3 χρόνια και 5 μήνες)

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An overview of resource
economics

John Rolfe

What are economists?


Practitioners of the
‘Dismal Science’


Term coined after
Malthus made
gloomy predictions
in 1800s that we
would all run out of
food



Someone who is good
with numbers but not
enough personality to
become an
accountant

Who are resource economists?


Deal with
choices to be
made about
natural
resources


Apply
economic
principles to
environmental
and production
tradeoffs

What economists do?
-

1


Identify why
problems exist


Market failures

Public good aspects not
provided by markets

Spillover effects exist


Government failures


Poor information and
decisions


Rent seeking
behaviour

What economists do?
-

2


Evaluate
tradeoffs
between
production and
environment


Need to identify
where there are
tradeoffs and
synergies


Need to predict
the tradeoffs


What economists do?
-
3


Identify whether
it is worth
addressing the
problems


Technical tools
such as cost
benefit analysis


Some other
decision rules
also available

What economists do?
-

4


Identify the
incentives needed to
get desirable
changes


Design solutions


eg
market based
instruments


Evaluate different
policy proposals


Identify barriers to
adoption


What economists do?
-

5


Identify roles for
governments and
markets


Often some focus on
coordinating
incentives and
designing rules


Identify how private
incentives can be
adjusted



What economists do?
-

6


Evaluate the
economic impacts
of different policies
on various groups
in society


Different policies
may impact on
farmers,
consumers or
wider society

Evaluating tradeoffs between
production and environment


Tradeoffs often complex


Sometimes synergies
between production and
environmental condition


Sometimes tradeoffs


Usually large time lags


Effects vary over time and
space


Effects not linear


Often threshold effects
involved


Large knowledge gaps

Who needs the information?


In the past, mostly by
government


New NRM models
mean


Regional bodies need
information to be
able to address
issues


A lot of focus at the
individual farm level


Need information to
be transparent and
build trust

Why is it worth doing?


Landholders are
unlikely to engage with
processes where there
is no recognition of the
costs that may be
incurred by them.



Need to understand
production tradeoffs to
design mechanisms
and incentives for
landholders to change
management actions
.

Production tradeoffs


Production losses tend
to be associated with
socio
-
economic
impacts, so an
analysis of potential
production losses can
help to design
mechanisms that
avoid or avert these
impacts.


The economic toolkits



assessing production


Production models


Build a model of
farm operations,
then adjust a
condition (eg
environmental
factor) and identify
change in outputs


Variety of models of
varying complexity

Alternative ways of assessing
production tradeoffs


Analysis of land
prices


Expectations about
future profitability


Identify how land
values change as
influencing factors
change


Methods to
estimate values
directly from
landholders


The economic toolkits



assessing community demands


Need to identify the
benefits of different
management options


Improved conservation
and environmental
management will have
community benefits


Economic tools used to
estimate benefits


Non
-
market valuation
techniques


Benefit transfer

Putting community demands and
production tradeoffs together


Compare the
benefits of
different actions
and policies with
the costs


Costs can be a
variety of
financial, social
and other
tradeoffs


Cost benefit analysis


One of the main ways
that economists analyse
major development
proposals and
environmental problems


Similar to Net Present
Value technique
commonly applied in
finance


Works by identifying all
the costs and benefits
that would result from a
particular resource use


These include non
-
money costs and
benefits


Cost benefit analysis of tree clearing

Impacts
Benefits
Costs
Property level
- direct, medium term
Income from improved pasture
production
Cost of clearing trees, improving
pasture, controlling regrowth
- indirect, longer term
Possible reduction in grazing
pressure on rest of property
Reduced benefit of tree cover (eg
shade, shelter, nutrient recycling)
Improved access for mustering
Pastoralists own value for risk of
salinity, erosion
Pastoralists own value for
biodiversity loss
External impacts
- Social value of land quality
Possible reduction in land
degradation on some properties
Possible increased risk of
salinity/erosion above landholder
expectations and on other
properties
- Cost of greenhouse gases
Impact of land clearing on
greenhouse gas emissions
- Social value of biodiversity
Effect of tree clearing on
biodiversity
- Indirect effects of production
Social value of positive effects on
rural communities
Some of the issues to include


Value of net
production tradeoffs


Community values
for conservation


Values of impacts on
recreation, cultural
heritage, visual
amenity


Value of impacts on
people and
communities

Multiple Criteria analysis


A bit similar in performance
to CBA


Impacts are identified, and
then rated by a group of
stakeholders and experts


Weightings are ‘summed’ to
give answer


Commonly used because it is


Relatively quick and easy


Engages stakeholders and
experts


There is no definitive basis for
setting the weightings


Some potential to be
arbitrary


Process open to influence by
different stakeholders and
interest groups



Economic toolkits
-

Designing solutions


Providing the right
incentives to get
better resource
use


Using better
techniques


Market based
instruments


Conservation
auctions


Emissions trading

The purpose of today


searching for
better ways of doing things


Identify tools to
evaluate NRM
investments


Be able to justify
investments more
on economic terms


Provide a basis for
doing simple cost
-
benefit analysis


Establish networks

Looking to the future


Some of the resource
tradeoffs are
becoming more
intense


More resources being
allocated


More uncertainties and
risks involved


Continuing need to
update processes for
making decisions and
investments