Quiz #1 - SOLUTIONS Thursday, September 10, 2009 INSTRUCTIONS: (1)
Please use the back of your chart as the examination form
(2)
Write only your student ID# on the top of the form. We will be grading them blind. If your ID is not clear, we will not be able to record a grade for you.
(3)
Please answer ALL three questions. Each question is worth 4
points.
Question #1 (BASED ON THE CHART): From your chart, very briefly
describe what the most significant risks to human health and safety are in the US or worldwide at the start of the 21st century? Are the leading risks related to environmental factors? Explain how. Finally, what does the data tell us about how we should devote resources to mitigating such problems? (1 point) for bringing in a relevant chart/table. (1 point) for commenting on how these are related to environmental factors. For example, if the leading cause of death in the US is heart disease, a good answer might suggest that heart disease is not generally directly related to the major environmental problems we can think of but that certainly there can be environmental problems such as air pollution which exacerbate or cause certain conditions. (2 points) These types of data actually provide very little help in determining the most effective place to spend resources. Just because something is a major risk factor does not mean the most resources should be devoted to it. The relevant economic question follows: where would additional resources have the largest impact on reductions in mortality and morbidity? It might be the case that marginal improvements are largest for the most serious risk factors, but that by no means is evident from the raw data we need to know how easy it is to reduce the risks of the various factors before allocating dollars toward one or another.
Question #2 (BASED ON THE CLASS NOTES): In class we discussed
how living in a world of zero pollution is not an option. One reason for this is that pollution is not something desirable in itself, or produced for its own sake, but rather is the byproduct of the creation of goods and services that we enjoy. Therefore, to reduce pollution to zero would require us to forego all of the products and services that we enjoy, but that also cause pollution. Suppose that we stumbled upon some pollution that was not a result of something we liked some evil person has secretly been pumping it into the air for decades. Is it possible to eliminate all of this pollution? Explain. (1 point) Generally, NO. (1 point) It is costly to clean up pollution. (2 points) That does not necessarily mean we cant eliminate it to zero, but for virtually all pollutants, the cost of cleaning up an additional unit increases as we clean up more pollution. This happens for two reasons (for full credit, I expect you to describe only one of these). First the direct clean-up costs of pollution abatement increase as we try to clean it up. For example, it is far more difficult to locate and eliminate the very last molecule of pollution than it is to do the same for the very first. Second, the indirect clean up costs also increase as we abate more pollution. Although the pollution itself (in this case) does not come from activities that we enjoy, dedicating resources to fighting pollution means that we are giving up the opportunity to employ them elsewhere in ventures that we enjoy. So, to clean up the first units of pollution, perhaps we all give up our least valuable endeavors such as watching reruns of Archie Bunker early in the morning. However, in order to continue abating pollution, we must give up more valuable activities as we continue in the process. To get that last molecule of pollution might require you to quit your day job, or have workers stop doing R&D on solar technology and doing more R&D on detection of microscopic pollution particles. At some point, it is not worth it to clean it up. Question #3 (BASED ON THE READING): In the Fullerton and Stavins article, the authors describe why economists so vehemently pursue the use of prices when valuing environmental amenities. Is it because economists are only concerned with the financial flows that emanate from environmental resources? No. Why, then, do we insist on finding prices for virtually everything?
(4 points) We need to find a way to express the total value to society of
various environmental amenities. When it comes to the environment there are many types of values that we would like to consider when doing cost-benefit analysis, or merely thinking about the scope and nature of problems. In addition to financial values, environmental amenities provide use value, existence value, option value, and a variety of other values that are not generally represented by prices. However, we still need to figure out a simple way to express all of these values together, and prices/monetary terms are an extremely convenient, if imperfect, way of doing it