Economics and the environment: the basics

The St. Louis Fed has put out a nice little primer on how economists think about the environment. It's here. Short version: we try to balance costs and benefits!

A hat tip to Ms. Shana Gass for noticing the post. Thanks!

Why does Big Food exist?

On one hand, it's easy: they exist to make money. The question is whether they do so by providing a valuable service, or if they do so by being exploitative. Surely the answer is a little bit of both, but a lot of us tend to focus on the latter more than the former.

There's a nice interview in the Washington Post with a VP for Nestle, the global mega-conglomerate that produces many products you've heard of.

Interesting quotes: "Packaging is a huge source of littering and other negative environmental impact. But can we take packaging away from food? You know what will happen, and immediately? The amount of waste will multiply by who knows how much if we take away packaging from our food system."

When asked why does Nestle exist, he says, "Because it would be impossible to feed 7 billion people, let alone billions more to come, without it. Because we need to preserve food, and safely, so consumers can eat and drink under any condition and in any season."

It's not exciting to think about, but it seems pretty clear: the work these folks do really does get all of us better nutrition. If we had to eat only what was produced locally and when it was in season, then I'd have grown up eating pine nuts and fish in the summer and probably stews made of rabbit flour in the winter (which is what I understand the Washo and Piute tribes ate in my hometown of Reno, Nevada before Europeans arrived). While that sounds cool in a way, I really like having a lot of different foods in my diet, and I'm healthier because of it.

It's easy to point a finger, but be thoughtful as you do so; remember the other side of the story too!

Conservation rentals

The Nature Conservancy and other land trusts promote conservation by buying land that provides a number of ecosystem services and/ or is habitat for species of interest. In the Nature Conservancy's most recent magazine there's an article about a new approach: land rentals for conservation. In particular, migratory birds need places to land while they're traveling. After identifying key places for bird stopovers, the Conservancy paid some rice farmers to keep their fields flooded in the off-season. I had heard of something similar before, in which California rice fields were flooded to attract ducks for hunters, but now it seems they're trying to time it right and keep an eye out to see whether the temporary habitat helps rarer birds on their way. There's a fair amount of economics behind it: it's tough to find the right level of payment to minimize Conservancy expenditures and maximize the level of quality land provided to the birds. Fortunately there are economists with more skill in this than I have who can help the Conservancy figure out how to do this best!

More from Toledo and Tyson on GMO's

Anyone living near or otherwise caring about the Chesapeake has long known the impact that fertilizers have on it and on other bodies of water: fertilizers = plant growth = algae blooms. This is true whether the fertilizers were sprayed on crops with an intent to fertilize or if they are runoff from concentrated animal feeding operations. Now that algae limited access to drinking water in a city of over 500,000 (instead of merely limiting the production of crabs and fish as it does here in Maryland) maybe there will be more than requested voluntary controls. Then again, maybe not.

Great article sent to me today by Prof. Jane Wolfson: Neil deGrasse Tyson is getting into the issue of GMO's. He says that there are problems such as monopolies and nonperennial seed production, but that these are not problems intrinsically linked to GMO's. If you want to fight those problems, great: you should. That doesn't mean you should be opposed to all GMO's, though!

Full costs of solar and wind

In many city-building video games, power comes from windmills. Windmills have a very clean image because they don't directly produce smoke, but they do have one downfall: they don't turn when the wind doesn't blow. Wind is mostly seen as a supplemental energy source because you can't depend on it for 100% of your energy needs. A nice little one page article in the Economist sums up researcher Charles Frank's study which finds that because of these associated costs, solar and wind energy are more expensive than they seem. In fact (as of current technology) nuclear and natural gas-fired power are both cheaper, even considering the damage associated with air pollution. (Of course, nuclear emits no CO2, either....) There are a few caveats, as always, but these issues can't be ignored.

More on prices

Two articles today in two newspapers bring up the issue of prices.

1) In the NYT, Prof. Robert Frank argues that we need to put a price on pollutants: specifically, CO2 and other chemicals that are effecting global warming. If there is a reason not to pollute, i.e. you have to pay for what you emit, people will be more careful. Right now there is no reason to care about it. Seems pretty clear to me.

2) The Washington Post has an article about Toledo, where there are problems with the water supply. People are buying huge amounts of bottled water to get by. There are two ways to distribute water: you could charge a high price for it and thereby limit how much people buy, or you can charge a low price. When you charge a low price, you won't have enough to sell to everyone who wants it, so people will have to line up, in some cases for hours. In effect, you're charging people in hours instead of dollars, and you're rewarding people with free time over people who have responsibilities. Is that better? On the other hand if you raise prices, what will be the larger effects? Say that water is selling for $1 per liter in Columbus and $2 per liter in Toledo, and you run a grocery story chain. Where do you send your water? You send it to the place with the higher price: the market responds to the increased demand, providing more water. With the time allocation system, why send more water to Toledo? Sure, you get some people saying thanks, and calling you a good citizen, but it seems to me (for some reason) that people are more likely to get water to where it's needed if prices are allowed to rise.

Getting the prices right

The Brookings Institute blog has an interesting piece today arguing that India doesn't have dependable access to electricity because the price has been too low for too long. No one benefits if energy suppliers are not allowed to make their costs back: you end up with people who either just don't have power or who rely on dirty diesel generators when the need it. Neither is a good solution!