The Environment in Economics and Development

Pluralist Extensions of Core Economic Models

Author: Vikram Dayal

Publisher: Springer India

Book Series : SpringerBriefs in Economics

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

About this book

This brief views the environment through diverse lenses – those of standard economics, institutional economics, political science, environmental science and ecology. Chapter 2 discusses diverse theoretical and statistical models – constrained optimization models, game theory, differential equations, and statistical models for causal inference – in a simple manner. Developing countries have certain distinct environmental problems – traditional pollution and traditional dependence on the commons. While chapters 3 and 4 discuss these specific problems, statistical graphs of the World Development Indicators explore the macro-context of developing countries in chapter 1. Chapter 5 examines ecological systems, which are nonlinear and unpredictable, and subject to sudden regime shifts. Chapter 6 deals with the global challenges of climate change and biological invasions. The last chapter discusses sustainable development and institutions. The brief explains these topics simply; mathematics is largely confined to an appendix. The broad treatment and simple exposition will appeal to students new to the field of economics. The extension of core economic models in diverse directions will also be of interest to economists looking for a different treatment of the subject.

Frontmatter

Chapter 1. Context and Overview of Environment and Development Economics

Abstract

I provide an overview of the brief and discuss pluralism briefly. I explore environmental indicators (using the World Bank’s World Development Indicators) with statistical graphs related to Chaps. 3–7 of the brief. I plot time series for certain select countries as well as scatter plots for all countries. For modern pollution I explore the indicator ambient concentration of fine particulate matter and for traditional pollution I explore the indicator access to an improved water source. Both indicators have been improving over the last few decades. The percentage of population that is rural indicates the population in developing countries who tend to depend on rural commons; this has been declining. Countries have attempted to preserve complex ecosystems by setting aside land as protected areas—often with a period of rapid growth in such areas followed by leveling off. Carbon dioxide emissions have followed economic growth closely. Finally, I explore the World Bank’s adjusted net national savings estimates, which are intended to be indicators of sustainable development.

Vikram Dayal

Chapter 2. Models and Frameworks

Abstract

I discuss theoretical and empirical models used in environmental economics in a basic manner. I discuss constrained optimization models with an example of a non-renewable resource that is depleted over two periods. I then briefly look at models that use game theory and differential equations. In the discussion of regression models, I use the idea of a causal graph to help distinguish between association and causality. I then briefly set out the institutions and development framework of Elinor Ostrom. I conclude with a framework for thinking about diverse models—both theoretical and statistical.

Vikram Dayal

Chapter 3. Traditional and Modern Pollution

Abstract

Pollution is a key concern in environmental economics, and economists have used their models to argue that this market failure can be overcome by harnessing market signals. The simple model of pollution control makes the argument clear, but in practice, developing countries use diverse instruments to control industrial pollution. In developing countries traditional pollution is a major cause of disease. We want to reduce pollution because we think it has harmful effects, but how do we establish our knowledge of its effects? Establishing the causality convincingly is difficult, but was done by John Snow in the middle of the nineteenth century in the case of cholera. The simple model of pollution control suggests that we consider the benefit of pollution control, but how do we establish them? For many, environmental economics is synonymous with monetary valuation. Monetary valuation is achieved by using a theoretical model along with an econometric one. In a developing country context, if we dig deeper, we may recognize the role of norms.

Vikram Dayal

Chapter 4. Livelihoods and the Commons

Abstract

Some public and microeconomics textbooks present Hardins’ Tragedy of the Commons and the Prisoner’s Dilemma Game and stop there, signaling the inevitable tragedy. However, a more satisfactory treatment by Wydick uses game theory to explain how the Prisoner’s Dilemma of the commons can be overcome. Somanathan et al.’s study of Van Panchayats is important both for its result (community management is more cost-effective than management by the forest department), and for its method (establishing causality carefully). Agricultural household models help us incorporate diverse linked production and consumption activities of the household related to biomass extraction. However, community attributes and ecology may have co-evolved historically, influencing patterns of biomass extraction.

Vikram Dayal

Chapter 5. Complex Ecology

Abstract

The starting point for modeling biological resources is using a model of fish growth represented with a logistic equation and seeing the effects of different levels of harvest. Protected areas in developing countries represent interactions between ecological systems, the modern tourist industry, and the traditional rural economy. A predator prey model with multiple stakeholders was used to model wildlife in Ranthambhore National Park. Models can be extended with scenario analysis if we cannot control the system easily or it is less predictable. Valuation estimates of natural sites use static economic models; Kanchan Chopra argued that such short run economic values are based on long run ecological dynamics. In nonlinear dynamic systems it is possible to get an environmental regime shift; econometric techniques to detect structural breaks may detect such regime shifts, given suitable data. A non-linear equation can generate ‘deterministic chaos’—apparently random behavior that is not random.

Vikram Dayal

Chapter 6. Global Public Goods

Abstract

Global public goods affect people all over the earth. Sandler stresses the aggregation technology of different global public goods; the mitigation of carbon dioxide is a summation public good while checking biological invasions is a weakest link public good. Simple game theory models of summation and weakest link public goods are considered. While climate change is widely perceived to be the major environmental issue for humanity, Perrings claims that biological invasions are one of the most important challenges. I consider the ingredients of a model where global change consists of climate change and linked biological invasions; the formal model is in the Appendix. A key issue in climate change is the discount rate, and Partha Dasgupta argues that if climate change is truly disastrous the discount rate could be negative, strengthening the case for acting to avoid the disaster. Chhatre and Agarwal investigated the following question: if we have an interest in sequestering carbon in the forests of developing countries, how are livelihoods likely to be affected; this involves some conceptual and empirical issues.

Vikram Dayal

Chapter 7. Sustainable Development and Institutions

Abstract

The World Bank now publishes estimates of adjusted savings for the world’s countries to keep track of sustainable development; the environment is seen as a gigantic capital asset. I explore these estimates for different countries. Dasgupta and Maler, who have worked on theoretical models of environmental accounting, initially used optimal control models but have shifted to modeling imperfect economies, in which institutions can affect resource allocation. Sneddon et al. suggest the importance of deliberative democracy for sustainable development, and Vatn describes the use of deliberative processes, which can build on structured information. Duflo and Pande statistically estimate that on average, dams in India increased poverty.

Vikram Dayal

Backmatter

Title: The Environment in Economics and Development
Author: Vikram Dayal
Publisher: Springer India
Electronic ISBN: 978-81-322-1671-1
Print ISBN: 978-81-322-1670-4
DOI: https://doi.org/10.1007/978-81-322-1671-1

Springer Professional

About this book

Table of Contents

Frontmatter

Chapter 1. Context and Overview of Environment and Development Economics

Chapter 2. Models and Frameworks

Chapter 3. Traditional and Modern Pollution

Chapter 4. Livelihoods and the Commons

Chapter 5. Complex Ecology

Chapter 6. Global Public Goods

Chapter 7. Sustainable Development and Institutions

Backmatter