Question

There is an abundant supply of media stories on global warming, carbon taxes, cap-and-trade, traffic congestion, the declining east-coast fishery, and other externality-related topics. Two fundamental issues underlie all of the stories. One is the lack of property rights. The other is the opportunity cost of tackling problems of negative externalities. In this learning activity, it is appropriate to return to, and reinforce, the single-most-important-concept-in-all-of-economics - opportunity cost.

Opportunity cost is at the heart of a scenario mentioned at the beginning of Module 5 - we can have a world without pollution if we are willing to drastically reduce our standard of living. The informed question is: how do you find the efficient level of pollution that balances the environmental benefits of lower pollution with the opportunity costs of lower living standards.

The importance of trade-offs is dramatically clear in the following story:

DDT is an effective, potent pesticide that persists in the environment - it accumulates in animals that eat insects and is now banned in many countries, including Canada. Should DDT be banned everywhere, or is it just like the goal of zero pollution? Without more information, we tend to think, yes, it should be banned everywhere. But all choices have opportunity costs.

DDT is by far the most effective tool in fighting malaria because it kills the mosquitoes that spread the disease. In the 1950s and 1960s, widespread use of DDT all but eliminated malaria in most countries, and by 1970 had saved an estimated 500 million lives.

Since then, DDT has been banned in many countries, and malaria outbreaks have increased significantly. In Mozambique, malaria infection rates are 20 to 40 times higher than in neighbouring Swaziland, which never stopped using DDT. The World Health Organization estimates that roughly 500 million people currently suffer from malaria, most in sub-Saharan Africa. About 2 million die per year.

So, should DDT be banned everywhere?

Part 1

Split your group into two sides. One side must defend the decision to ban DDT. The other side must defend the use of DDT. The lesson is to never make a choice, including environmentally friendly choices, without considering the opportunity costs.

Part 2

In your group decide on another trade-off scenario to debate, again pitting two sides against each other and considering all of the opportunity costs.

Answer 1

PART-1

Opportunity Costs

Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. The idea of opportunity costs is a major concept in economics.

• In defense of DDT

DDT or Dichloro-Diphenyl Trichloroethane is a colourless, tasteless and odourless organic compound used as an insecticides or pesticide. The main purpose of was to use it as an insecticide.

The following points illustrate the advantages of using DDT as an insecticide :

1. Cost effective : When DDT was developed it turned out to be cheap and effective remedy against insects. This also turned out to be a boon during second half of Second World War. to this day it is  an efficient alternative alternative.    
2. Remedy : It was used as a remedy towards typhus and malaria during that era and modern times.
3. Advantages to low income countries : As per World Bank Malaria poses a threat to almost half of world's population. As a result, malaria places a heavy economic burden on many countries with high disease rates, with estimates of as much as a 1.3 percent reduction in GDP in those countries. DDT is beneficial because of its high insecticidal activity, low acute mammalian toxicity, wide spectrum use, low price, and long duration of activity.   
4. Crucial for countries with high risk : There are certain countries where the incidence of risk from malaria is very high this includes countries like Liberia, Malawi, Mozambique, São Tomé and Principe, Tanzania, Uganda and Zambia, the losses due to malaria may rise to a significant proportion of their GDP. So in the following places the populations are more vulnerable to widespread existance of mosquitoes and hence the benefits of using DDT far outweighs the disadvantages of using DDT.   
5. Pesticide for crops : DDT is used to applied as a crop dust or water spray on orchards, gardens, fields, and forests.

• Disadvantages of using DDT

The following section will outline the various hazards associated with DDT:

1. Health hazards to Humans : The human body is not able to break it which cause its build up in the food chain and causing poisoning with may affect children and cause temporary damage to nervous system, possible carcinogenic effects (such as liver cancer, pancreatic cancer, testicular cancer, breast cancer, leukemia and lymphoma),
2. Hazards to animals : DDT causes various problems to flora and fauna. Apart from poisoning it affects birds as the production of thin eggshells vulnerable to damage.   
3. Long term drawbacks to GDP : Due to it's adverse environmental effects it may cause many economic setbacks to economies.

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  PART-2

Let us consider the both trade-off aspects of using Windmills to generate wind energy.

• Merits of Using Wind energy :

1. Cheap : Wind energy is one of the most affordable sources of energy as it is renewable and does not require a lot of expensive implements.
2. Clean source of energy : Wind energy doesn't pollute the air like power plants that rely on combustion of fossil fuels, such as coal or natural gas, which emit particulate matter, nitrogen oxides, and sulfur dioxide—causing human health problems and economic damages. Wind turbines don't produce atmospheric emissions that cause acid rain, smog, or greenhouse gases.
3. Does not require additional space : This greatly benefits the economy in rural areas, where most of the best wind sites are found. Farmers and ranchers can continue to work the land because the wind turbines use only a fraction of the land. Wind power plant owners make rent payments to the farmer or rancher for the use of the land, providing landowners with additional income.   
4. Sustainable : This source of energy does not require coal or any non renewable implement. As long as the sun shines and the wind blows, the energy produced can be harnessed to send power across the grid.

• Challenges of Wind Energy :

1. Limited availability of sources : Transmission lines must be built to bring the electricity from the wind farm to the city. However, building just a few already-proposed transmission lines could significantly reduce the costs of expanding wind energy.
2. Noise pollution : . Although wind power plants have relatively little impact on the environment compared to conventional power plants, concern exists over the noise produced by the turbine blades and visual impacts to the landscape.
3. Displaces wildlife : Many birds get killed as a result of  spinning turbine blades. This also results in construction in remote locations as a result the wildlife residing there gets displaced.   
4. Fall in prices : A few estimates indicate that the asking price for properties whose view was strongly affected by the construction of wind turbines decreased by about 9–14%. In contrast, properties with a minor or marginal view on the wind turbines experienced no devaluation. This may be due to disadvantages of living near wind turbines.