Question

Please give answers of the following questions:

1. What are the strengths and limitations of using estimates of total economic value to

develop environment policy recommendations? How does your answer relate to your

worldview (anthropocentric or ecocentric)?

2. Do you think contingent valuation should be widely used as a tool for developing environmental policy recommendations? What do you think is the main strength of CV?

What do you think is its main weakness?

3. Suppose that you are asked to conduct a cost-benefit study of a proposed coal-fired

power plant. The plant will be built on the outskirts of a residential area and will emit a

certain volume of pollutants. It will require a substantial amount of water for its cooling

system. Industries in the region argue that the additional power is urgently needed, but

local residents oppose construction. How would you evaluate social and environmental

costs and weigh them against economic benefits?

4. As mentioned in the text, under U.S. law federal agencies must use cost-benefit analysis to evaluate major policy proposals. Do you agree with this requirement, in particular for environmental policies? How much weight do you believe should be given to the results of cost-benefit analyses when making policy decisions? Discuss how economic, health, and environmental criteria should be balanced in formulating regulations.

5. Suppose that the government of a developing country is considering the establishment of a national park in a scenic forested area. Local opposition arises from those who wish to use the forest land for timbering and agriculture. But the national park would draw both local and foreign visitors as tourists. Could cost-benefit analysis aid the decision on whether to establish the park? What factors would you consider, and how would you measure their economic value?

6. In what respects is “natural capital” similar to human-made capital, and in what respects does it differ? We often speak of a “return to capital,” meaning the stream of income generated by a capital investment. Can we speak of a return to natural capital? What are examples of investment in natural capital? Who is motivated to make such investments? Who would suffer if such investments were not made, or if “disinvestment” occurs due to resource depletion or environmental degradation?

7. Is the concept of optimal scale for an economy useful? If so, how would you go about

determining it? Do you think that economies such as those in the United States, Europe,

and Japan have reached optimal scale? Exceeded it? How about the economies of Latin America, Asia, and Africa? How would you relate the concept of optimal scale in the global economy to economic growth in national economies at different levels of development?

8. Distinguish the concepts of strong and weak sustainability, and give some practical examples, other than those cited in the text, for their application. Where is each concept most appropriate? Which economic policy measures are relevant to achieving sustainability?

Answer 1

Total economic value is an important method used to make recommendations on environmental policy. It takes into account total or aggregate effect of three economic factors which includes consumptive or direct use values, non consumptive or indirect use values and option values. We determine consumptive use value with the help of price mechanism when the product is sold in the market rather than consumed by the people.

Indirect Use Value

The various ecological functions such as cleaning of air by forests without any cost comes under indirect use value. This value is equivalent to the cost if the forests are not there and we need to spend on cleaning the air. Amazon forests plays a great role in this but recently they were subject to fire resulting in loss of widlife and disturbing ecological balance.

Option Value

Individuals also sometimes pay for maintaining a resource for future use or for next generation that is called an option value.All the steps we take to conserve natural resources particularly water will save future generations from adverse situations.

Existence Value

Sometimes people also want to pay for the existence of the natural environment in the same condition as they did in the first situation. The value they placed for this is called existence value.

If all of these values (direct use values, indirect use values, option values and existence values) are incorporated into policy making, then we can keep our environment in a better way. This is the main strength of the total economic value. This method does the cost benefit analysis of each thing and then make policy recommendations.

The main limitation of this method is the availability of data. It is not easy to calculate total or aggregate economic value because data on all these values is not available at national level and it is very costly to conduct large household surveys to calculate these values.Moreover calculations are complex.

According to the world view, climate change is taking place at a global level. The ozone layer is depleting. The pollution is rising due to industrialization. The ground water level is depleting. The consequences of environmental hazards are rising temperatures, rising sea levels, floods, droughts, tsunami, earthquakes. So for conservation of the environment it is imperative to take into account all these values for better environmental policymaking and recommendations.A healthy environment will ensure healthy future.