Environment and Risk: The Problem
of Risk Assessment
Nature always presented risks to
mankind and to all life
 Living beings have adapted to those by
developing survival stra...
Focus on Society-Environment
Interactions
 What behavioral and institutional factors
mediate relations with natural syste...
Environment-Society Issues
 Level of resource use
 Population size
 Even with constant level of use, attain limits
as p...
Environment-society issues
 What behavioral and institutional factors
mediate relations with natural system?
 What featu...
Environment and Society. A
Critical Issue for our Future?
 At issue is relation between natural
processes and human popul...
General Issue: Environmental
Influences and Human Control
 Immediate environmental influences high in past:
very high ris...
The Assessment of
Environmental Risks
 The studies of society collapse show the importance
of knowing the environment in ...
Risk management types
 1. Risks due to nature
 2. Risks due to the consequences of
uncoordinated and non-cooperative hum...
Risks due to nature can be assessed
in terms of expected utility
 2 elements: uncertainty measure p (probability) of
an o...
Risk analysis
 Suppose we have several other outcomes
resulting from different plans of action
Possibil
ities
Actions Do ...
Risk analysis
States of Nature a1 a2 a3
r1
Extreme bad weather
7000 4000 2000
r2
Nice weather
1000 4000 5000
Risk analysis continued
State of nature r p (r )
r1
Extreme bad weather
0.40
r2
Nice weather
0.60
Solution of the minimization of
expected losses: Min L(a) =
Min (aij p + aij (1 –p))
 Expected losses of a1 are inferior ...
Cost Benefit Analysis
 Previously take the ΣPiUj which is largest
(or smallest if the U’s represent costs)
 Climate chan...
Risks from Nature, Risks from
Society
 As seen from the Stephens text in Cashdan,
risk analysis can help us understand an...
Complexity of Human Behavior
 Human behavior is obviously complex.
One can analyze it with the help of general
concept su...
Welfare preserving collective
goods
 In welfare preserving (rival) collective goods,
users represent a negative externali...
Welfare Preserving Collective Goods:
 Dasgupta and Heal Economic Theory and Exhaustible
Resources (1979)
 Graciela Chich...
Problem: 2 strategies
•Adhere or not to a strategy depending on what others are
doing.
•This problem can have a stable (Na...
Theory of Collective Goods and
Theory of the Open Access
 The importance of jointness: Behavior
driven by average product...
Open access resource use
 Open access situations are characterized by
an overuse of Resources at any price. This
is due t...
Open access and “private” supply
Graphical Illustration
Role of a Market for Externalities
 Mechanisms developed by society
 To set limits on resource use before
diminishing re...
Market for externalities
solution
Conclusion
 There are several ways of solving the open
access question
 Markets for externalities, the most efficient
so...
Property rights
Role of Property Rights
 Mechanisms developed by society
 To set limits on resource use before
diminishing returns set i...
Property Rights
solutions
Standard economic view of
property rights
 Well-defined property rights
 Market mechanisms and a pricing system
 No tra...
Private property solves production
(and environmental) problems
 Can anticipate diminishing returns:
incorporate foregone...
Possible problems
 Definition of the property itself
 Enforceability of exclusionary rights
 Optimality
Common Property:
Tragedy of the Commons
Resource that is:
 Depletable
 Non-exclusive
 Rival
 Joint, fugitive
Common Property
 Resource unit defined
 Well-delineated user group
 Multiple users
 Explicit rules of extraction
Why Common Property?
 Nature of resource
 Economies of scale
 Maintenance or capital demands
 Enforcement
The Example of water
 Common good aspects
 Competitive use
 Particular spatial distribution creates
asymmetries
 Upstr...
Debates about water
 Debate over nature of resource
 Symbolic aspects: natural right
 Water as economic good
 Debate a...
 Symbolic aspects: natural right
 Open access?
BUT
 Demographic growth
 Urbanization: concentration of demand
 Agricu...
Nature of resource debate
 Water as commodity: evaluate costs
 Supply costs: exploitation, maintenance,
investments
 Op...
Management problems
 How to balance equity issues raised by
"right to water" approach with efficiency
aspects raised by "...
Aral Sea 1985
A view of the problem
Aral Sea 1997
Causes of shrinking Aral Sea
 Since 19e
century, Russia, and later Soviet Union
emphasized cash crops: cotton and rice
 ...
Soviet system
 Quotas specifying quantities of water
available for each region
 Exchange fossil fuels and energy for wat...
Present context
 Water allocation is no longer an domestic
issue within a centralized state but has
become an internation...
Current management structure
 Almaty Agreement 1992
 Based on former Soviet allocation system
 Creation of interstate c...
Management problems
 Maintenance of old Soviet system
 Not all states accept previous allocation
criteria
 Favors riche...
Persisting common good problems
 Lack of information on quantities really
available
 Thus cannot determine sustainable r...
Reaction
 After independence , Uzbekistan and
Kazakstan introduced market prices for gas
and coal.
 Kyrgyzstan couldn't ...
Response
 2001: Kyrgyzstan passed law to regulate
transborder water use:
 Water belongs to state
 Has economic value
 ...
Water: International efforts
 Dublin Conference and Rio Summit, 1992
 Broad often contradictory principles
 Slow defini...
Relevance of different property
regimes to other current
environmental issues
 Confrontation of regimes is occurring
 So...
Problems of environmental
regulation; solution through
definition of property rights
 Atmosphere rival at global level
 ...
Efficiency, the Environment and
Property Rights
 What is efficiency in economic, social,
environmental, and technical ter...
Efficiency
 Economic and social efficiency: use
resources in such a way that they minimize
costs and maximize profits
 T...
The Coasian analysis
 Problem of property rights, efficiency and
externalities raised by Coase
 Argument: What matters i...
What do property rights provide?
 Demsetz claims that they are an
internalization of externalities
 Adjustment of proper...
Problems raised by Dasgupta and
Heal
 Property rights are not created in a vacuum
 Problem often comes from partially
de...
Multiple equilibria
Solutions
 In these cases, solutions have to be
revealed to producers
 Sometimes solutions have to be imposed
Sustainability and exhaustible
resources
 In some basic sense nothing is truly sustainable
since finite resources are con...
Sustainability continued
 Sustainability means that resources should be as
much as possible preserved for future generati...
Theory of slowly renewable
resources
 Slowly renewable resources have to be
evaluated as an evolving stock such as a
popu...
Slowly renewable resources:
Production
 Producers will be drawn into using the
stock by profits:
( )
( , )
2
d x
d t
q F ...
Equilibrium conditions
 In equilibrium there should be an optimal
level of the resource z if:
( )( )
( , )
e x p3
0
q F z...
Exhaustible Resources
 Hotelling Principle:
 An exhaustible resource is an asset and its net
price (market price - extra...
Hotelling’s Principle:
 Competitive resource owners will
deplete at a socially optimal rate
 Take r the rate if return t...
Conditions for Hotelling
principle
 1. No externalities
 2. No uncertainty about future sales,
exploration prospects, et...
Example:Deforestation processes
 According to Hotelling principles a forested area
is a particular type of asset whose ca...
This can be due to:
 subsidies for agricultural production
 income subsidies or welfare
 cost of property rights enforc...
Graphical analysis
Population Dynamics
 Fundamental problem of global
environmental change:
Balance supply of resources from physical
system...
Population dynamics
 Fertility
 Mortality
 Migration
 Population size
 Age distribution
Measuring Population
 Static: characteristics
 Total
 Age distribution
 Genders
 Urban/rural
 Geographic distributio...
Measuring Population
 Challenges in achieving accurate
assessment
 Completeness and accuracy
 Census comparability
 Di...
Projections
 Dependent on accuracy of initial conditions
(i.e. count)
 Need techniques of projection
 Postulate relatio...
Malthusian theories of population
 Assumptions
 Constant "passion between the sexes"
 Finite earth
 Argument:
 Left u...
Preventive checks
 Late marriage
 Celibacy
 Low marital fertility (spacing)
 Contraception
 Migration
Positive check:...
Alternatives to Malthus:
Boserup/Simon
 Relate technological progress to population
growth
 Population concentration lea...
Multiple influences on population
dynamics
 Demographic influences on fertility
 Institutional controls
 Property right...
Pre-industrial Western European
Demographic Regime
 High mortality
 High Fertility
 Fertility Controls
 Celibacy
 Age...
Limits to Malthusian Approach
 Explaining emergence of new demographic
regimes
 How technology might explain shifts
 Th...
Demographic Transition
 Characterized by a drop in marital fertility
 Achieved through "stopping" behavior, i.e.
control...
Demographic transition
 Puzzle
 Not linked to decreased mortality
 No obvious link to Industrialization
 No Malthusian...
Fertility Declines, Real and Projected
1
2
3
4
5
6
7
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
ChildrenperWom...
Stabilization Remains a Challenge
0
1
2
3
4
1950 2000 2050
StabilizationRatio(births/deaths)
(1=nopopulationgrowth)
Develo...
Sub-Saharan African Fertility Regime
 Low age at marriage
 Polygyny: men have many wives, leaving few
women celibate
 A...
Differences Pre-industrial
European and African Regimes
 Europe: reduce "exposure"
 Africa: spacing behavior
Characteristics of Sub-Saharan
African Social System
 Poorly defined or poorly enforced common
property systems
 Childre...
Changes in life expectancy in selected African countries
with high and low HIV prevalence: 1950 - 2005
with high HIV preva...
0 10 20 30 40 50 60 70
Cambodia
Haiti
Mozambique
Rwanda
Côte d'Ivoire
Zambia
Kenya
South Africa
Zimbabwe
Botswana
Life exp...
Population and environment: Key
points
 Population dynamics in part create
“demand” for environmental resources by
determ...
Two views of population—resource
interaction
 Population grows until limited by resource
availability (at all levels of t...
Problem: How to account for new
regimes?
 Malthus perspective could not account for
shift from high fertility—high mortal...
Demographic transition: the
definition
 “Pre-transition” Western Europe
characterized by high fertility and high
mortalit...
Demographic transition: the
evidence
 Shift from high to low fertility was a result
of deliberate family limitation
 Tra...
Causes: Early theories
 Link to modernization: Frank Notestein
(1944)
 “New ideal of the small family arose in the
urban...
The standard model
Transition: the European-US data
 Great variation in socio-economic and
demographic conditions
 Timing and extent of dec...
Transition: Developing countries
 Link to mortality seems more direct
 Knowledge and treatments not available at
time of...
Questions for future
 Evolution of African population patterns
 Response of regions where population
below replacement r...
Environment and Migration
 Migration constitutes, as mentioned before,
a significant factor in population dynamics
 Migr...
 There are two basic theoretical considerations
about migration which emphasize either push or
pull factors
 Voluntary m...
Involuntary migration
 A description of the multiple aspects of
involuntary migration is included in the Zollberg
article...
Voluntary Migrations
 Since voluntary migrations are based on
incentives to move, these incentives have to be
made explic...
Harris Todaro Model
 These 2 authors postulate a 2 sector rural
(agricultural) and industrial economy
 Wages in agricult...
Equilibrium conditions
 As long as the following is >0, migration will
occur
0','
min
>





−= ψψ Pq
N
NW
N
U
M
...
Other Factors Could Be Important
As well
 The pull aspect of cities exists before
Minimal wage policies are applied
 The...
Increasing Returns
Other incentive models: The
Owen land use model
 The land use model developed by Owen assumes
only two types of land use,...
Conclusions of Owen model and
further development
 Even under normal conditions, as long as there is
an attraction to mov...
Further conclusions
 Mass migration which can result from climate
change will accelerate this process.
 Foreign aid and ...
Trade and Environment
 From a general point of view, trade and the
environment should be neutral with respect
to each oth...
Positive and negative effects
 Environmental conditions can be positively
affected by trade liberalization
 Positive eff...
Property Rights, the
Environment and Trade
 Changes in the Economic Theory of Trade
 Traditional Theory Based on the Not...
Characteristics of Trade
 Importance of increasing returns in
 External aspects
 Monopolistic competition
 Some proper...
The Chichilnisky Perspective
 Chichilnisky (1994) has analyzed trade links
between regions with different property rights...
Open access and “private” supply
Chichilnisky Perspective
 This situation creates an "abundance" of the resource
in the region without or with ill-defined...
Chichilnisky: Analysis
 Assumptions about the region without well
defined property rights:
 elasticity of substitution b...
Consequences
 Regions with ill-defined property rights are "exploited"
those with well defined rights.
 Resultant lower ...
Analysis of Countries with Ill-
Defined Property Rights
 These countries are sensitive to price fluctuations
due to subst...
Environment and trade policies
 One has to distinguish here between
production and consumption
 The prevalent norm and W...
Conflict, cooperation, and the
environment
 The relations between conflict, cooperation
and the environment are numerous ...
Relationships between the
environment and human
production
 As technology evolves, the relations between the
environment ...
Conflicts over environmental
resources may exist but they are
difficult to show
 Difficulty to disentangle environmental
...
The Central Asian Water Question
Symmetric and Asymmetric
Access to Resources:
The Example of the Middle East
2 Middle Eastern Conflicts: The Jordan
and Euphrates River Basins
 Jordan River: Israel plus Palestinians use about
2300 ...
Some Theoretical Notions
 Goal: tackle problems analytically and suggest responses that
tend to promote strategies to min...
Fundamental Questions to Address
 What are the nature of the
conflicts
 How can one find optimal
solutions to solve them?
Water competition has technological
and economic limits
 Price of Water from Sea: fundamental
 Given by the cost of a m3...
Symbolic aspects
 The sharper the conflict and the demands
around it, the more is at stake
 Giving in on little things i...
How to get out of the conflict
spiral?
 Emphasize limited worth of conflict
 Franklin Fisher approach using pricing
 Pr...
Difficulty: The Mid-east
population explosion
Graph 6 Population Jordan: Observed and Calculated Values
0
0.5
1
1.5
2
2.5
...
The Mid-East Demographic Boom
Per capita GDP diminish in the Mid-
East
Row
Column
(3,3) (4,1) (2,2)
C
C C
C
Prisoner’s Dilemma
(1,4) (2,2)
Row
C C
Row
Column
(3,3)
(4,2) (1,1)
C C
C C
Chicken
Environmental Negotiations
 The Common problem makes it difficult to
carry out international environmental
negotiations
...
Unit veto and leader problem
 Unit Veto makes agreements even more
difficult
 Particular importance of players
 One has...
Akashdeepsinghjandu6 environment
Akashdeepsinghjandu6 environment
Akashdeepsinghjandu6 environment
Akashdeepsinghjandu6 environment
Akashdeepsinghjandu6 environment
Akashdeepsinghjandu6 environment
Akashdeepsinghjandu6 environment
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  • Progress Toward Population Stabilization by Region, 1950-2050
    Some regions are closer to the point at which death rates and birth rates are approximately equal and population growth levels off. For more information see http://www.wri.org/wri/trends/popgrow.html.
    Source: United Nations (U.N.) Population Division, World Population Prospects, 1950-2050 (The 1996 Revision), on diskette (U.N., New York, 1996).
    Notes: Progress toward stabilization is measured by dividing a region’s crude birth rate by its death rate. A ratio of 1 indicates a stable population. Values are based on 5-year rates.
  • Akashdeepsinghjandu6 environment

    1. 1. Environment and Risk: The Problem of Risk Assessment
    2. 2. Nature always presented risks to mankind and to all life  Living beings have adapted to those by developing survival strategies  These are not conscious but have been acquired in an evolutionary way  Human beings have done the same over the ages except that conscious strategies have replaced unconscious ones  What is new is that humans can modify significantly and quickly their environment  This is not new
    3. 3. Focus on Society-Environment Interactions  What behavioral and institutional factors mediate relations with natural system?  What features create vulnerability or resistance to certain natural events or processes?  What mechanisms are available to different types of society to adapt or mitigate change.
    4. 4. Environment-Society Issues  Level of resource use  Population size  Even with constant level of use, attain limits as population increases  Could these be related?
    5. 5. Environment-society issues  What behavioral and institutional factors mediate relations with natural system?  What features create vulnerability or resistance to certain natural events or processes?  What mechanisms are available to different types of society to adapt or mitigate change?
    6. 6. Environment and Society. A Critical Issue for our Future?  At issue is relation between natural processes and human populations  To what extent does human agency matter?  If human choices affect natural processes, can we identify some problems crucial enough to address now?  How can cooperation about environmental issues be organized?
    7. 7. General Issue: Environmental Influences and Human Control  Immediate environmental influences high in past: very high risks for humans, examples of collapse  Less important with technological progress: cushioning and spreading of risks  Some troubling aspects remain: mastering Climate change
    8. 8. The Assessment of Environmental Risks  The studies of society collapse show the importance of knowing the environment in order to assess the risks it presents: knowledge of two aspects are important: 1) The evolutionary dynamics of the crucial resource 2) The initial resource stock (ex. climate change)  It also shows the importance of social responses to the problems involved in terms of a) control of access b) charging for use in proportion  3 Types of risk management have therefore to be considered:
    9. 9. Risk management types  1. Risks due to nature  2. Risks due to the consequences of uncoordinated and non-cooperative human activities, present and future  3. Risks due to problems of coordination and cooperation of social institutions present and future
    10. 10. Risks due to nature can be assessed in terms of expected utility  2 elements: uncertainty measure p (probability) of an outcome and its subjective value or utility U:  P(o)U(o)  This formulation suggests a cost benefit analysis. Suppose there are only 2 outcomes, o1 and o2: Total value is:  P(o1) U(o1) + (1 –P) U(o2)  Present value: [P(o1) U(o1) + (1 –P) U(o2)]/r where r is a discount rate (interest rate)
    11. 11. Risk analysis  Suppose we have several other outcomes resulting from different plans of action Possibil ities Actions Do Nothing Build small levee Build big dike Minor flooding: P U1 U3 U5 High flooding: 1- P U2 U4 U6
    12. 12. Risk analysis States of Nature a1 a2 a3 r1 Extreme bad weather 7000 4000 2000 r2 Nice weather 1000 4000 5000
    13. 13. Risk analysis continued State of nature r p (r ) r1 Extreme bad weather 0.40 r2 Nice weather 0.60
    14. 14. Solution of the minimization of expected losses: Min L(a) = Min (aij p + aij (1 –p))  Expected losses of a1 are inferior to all others: 3400 instead of 4000 and 3800  This conclusion holds only if one cannot update informations
    15. 15. Cost Benefit Analysis  Previously take the ΣPiUj which is largest (or smallest if the U’s represent costs)  Climate change: Choose where Marginal Damage of CC = Marginal Cost of Abatement
    16. 16. Risks from Nature, Risks from Society  As seen from the Stephens text in Cashdan, risk analysis can help us understand animal behavior and thus raise our knowledge about nature  This is necessary for estimating stocks of natural resources and their evolution  Risks from Society involve the positive or negative influences (externalities) people can exert on each other
    17. 17. Complexity of Human Behavior  Human behavior is obviously complex. One can analyze it with the help of general concept such as the one of collective good. A collective good characterized by two aspects: Non excludability and some times non-rivalry. Collective goods that are rival, so called commons, thus 2 types of collective goods: welfare generating and welfare preserving
    18. 18. Welfare preserving collective goods  In welfare preserving (rival) collective goods, users represent a negative externality with respect to each other. The risk comes from others! The purpose of institutions is to limit use. This is difficult to achieve because there is a first mover advantage of non cooperation with the institution which then often leads to conflict and coercion  This model cannot easily be followed at the inter- institutional level
    19. 19. Welfare Preserving Collective Goods:  Dasgupta and Heal Economic Theory and Exhaustible Resources (1979)  Graciela Chichilnisky’s Trade Theory between Regions with Different Property rights Regimes (1994)  The choice is not really only between different types of rights but between different types of hierarchies of collective goods: Even private property rights have to be protected!
    20. 20. Problem: 2 strategies •Adhere or not to a strategy depending on what others are doing. •This problem can have a stable (Nash ) equilibrium •The equilibrium is only efficient if a sufficient number participate. •Non- Efficient Accord Efficient Accord Coop. Strat a(t) Non Coop. Strat b(t) Stable Nash Equ. Min fraction of total to sustain accord 0 t 1 Stable Nash Equ. Min fraction of total to sustain accord Non Coop. Strat b(t) Coop. Strat a(t) 0 t 1 U(t) U(t)
    21. 21. Theory of Collective Goods and Theory of the Open Access  The importance of jointness: Behavior driven by average product: F(Nx)/N(x)  Open access as opposed to private marginal product dF(Nx)/dN(x)  As emphasized by Dasgupta and Heal open access problems are not PD problems
    22. 22. Open access resource use  Open access situations are characterized by an overuse of Resources at any price. This is due to the fact that one can show that the open access marginal product is always superior to the “restricted access” marginal product
    23. 23. Open access and “private” supply
    24. 24. Graphical Illustration
    25. 25. Role of a Market for Externalities  Mechanisms developed by society  To set limits on resource use before diminishing returns set in  To meet needs across space and through time with greatest efficiency
    26. 26. Market for externalities solution
    27. 27. Conclusion  There are several ways of solving the open access question  Markets for externalities, the most efficient solution might not always be possible  The structuring of authority associated with the open access problem is quite important
    28. 28. Property rights
    29. 29. Role of Property Rights  Mechanisms developed by society  To set limits on resource use before diminishing returns set in  To meet needs across space and through time with greatest efficiency
    30. 30. Property Rights solutions
    31. 31. Standard economic view of property rights  Well-defined property rights  Market mechanisms and a pricing system  No transaction costs  No income effects  Assumes collective action problems solved
    32. 32. Private property solves production (and environmental) problems  Can anticipate diminishing returns: incorporate foregone benefits into present production decisions (Hotelling)  Private property rules provide means to maintain efficiency even when environmental externalities exist (Coase)
    33. 33. Possible problems  Definition of the property itself  Enforceability of exclusionary rights  Optimality
    34. 34. Common Property: Tragedy of the Commons Resource that is:  Depletable  Non-exclusive  Rival  Joint, fugitive
    35. 35. Common Property  Resource unit defined  Well-delineated user group  Multiple users  Explicit rules of extraction
    36. 36. Why Common Property?  Nature of resource  Economies of scale  Maintenance or capital demands  Enforcement
    37. 37. The Example of water  Common good aspects  Competitive use  Particular spatial distribution creates asymmetries  Upstream-downstream  Common pool: technology differences lead to differential access  Unequal political power  International aspects compound problems
    38. 38. Debates about water  Debate over nature of resource  Symbolic aspects: natural right  Water as economic good  Debate about most effective management strategies
    39. 39.  Symbolic aspects: natural right  Open access? BUT  Demographic growth  Urbanization: concentration of demand  Agricultural intensification  70% of water used for irrigation  Changing demands: economic development  Quality/quantity  Health issues: water borne diseases  Pollution: overuse and salinization Nature of resource debate
    40. 40. Nature of resource debate  Water as commodity: evaluate costs  Supply costs: exploitation, maintenance, investments  Opportunity costs  Externalities  Goal: promote efficiency and avoid "tragedy of commons" type outcome
    41. 41. Management problems  How to balance equity issues raised by "right to water" approach with efficiency aspects raised by "water as commodity" view?
    42. 42. Aral Sea 1985 A view of the problem Aral Sea 1997
    43. 43. Causes of shrinking Aral Sea  Since 19e century, Russia, and later Soviet Union emphasized cash crops: cotton and rice  Reduce dependence on imports  Acquire hard currency  After 1960, consequence of policy was reduction in volume of water flowing to Aral Sea
    44. 44. Soviet system  Quotas specifying quantities of water available for each region  Exchange fossil fuels and energy for water  Coordination by central government
    45. 45. Present context  Water allocation is no longer an domestic issue within a centralized state but has become an international problem  New source of conflict
    46. 46. Current management structure  Almaty Agreement 1992  Based on former Soviet allocation system  Creation of interstate commission where decisions taken by consensus  Establish quotas  Assure their implementation
    47. 47. Management problems  Maintenance of old Soviet system  Not all states accept previous allocation criteria  Favors richer downstream countries  Enforcement problems: quotas not respected  Exchanges between energy and water have been maintained but also not always respected
    48. 48. Persisting common good problems  Lack of information on quantities really available  Thus cannot determine sustainable rate of use  Costs of water use not distributed fairly  Downstream users of Toktogul dam do not contribute to maintenance costs
    49. 49. Reaction  After independence , Uzbekistan and Kazakstan introduced market prices for gas and coal.  Kyrgyzstan couldn't pay: increased electricity production to increase revenues but then the amount of water available for downstream irrigation in Uzbekistan and Kazakstan was also reduced
    50. 50. Response  2001: Kyrgyzstan passed law to regulate transborder water use:  Water belongs to state  Has economic value  Kyrgyzstan owns water "created" within it borders  Users must pay
    51. 51. Water: International efforts  Dublin Conference and Rio Summit, 1992  Broad often contradictory principles  Slow definition of international water law: UN Convention 1997 on non-navigational uses
    52. 52. Relevance of different property regimes to other current environmental issues  Confrontation of regimes is occurring  South/North  Common property characteristics of environmental resources  Institutional solutions are adopting common property arrangements
    53. 53. Problems of environmental regulation; solution through definition of property rights  Atmosphere rival at global level  Consumption interdependent  Command and control difficult to achieve because deal with countries  Introduce market solution to create incentives  Raises problems of initial allocation
    54. 54. Efficiency, the Environment and Property Rights  What is efficiency in economic, social, environmental, and technical terms?  Are they equivalent?  What is the relation with property rights?  Is the problem simple to solve?
    55. 55. Efficiency  Economic and social efficiency: use resources in such a way that they minimize costs and maximize profits  Technical efficiency: minimizing inputs with respect to outputs  minimizing energy use  There should not be any contradiction between the 2 above  If contradiction: not internalized externality, ill defined property rights
    56. 56. The Coasian analysis  Problem of property rights, efficiency and externalities raised by Coase  Argument: What matters is the overall cost and benefit  Compensation schemes can be built around this principle  It depends who has the biggest loss  The issue can be resolved by negotiation  All allocations based on Coasian principle optimal
    57. 57. What do property rights provide?  Demsetz claims that they are an internalization of externalities  Adjustment of property rights are an adjustment to externalities  Example: forced labor  Property rights originate under scarcities in particular environmental scarcities
    58. 58. Problems raised by Dasgupta and Heal  Property rights are not created in a vacuum  Problem often comes from partially defined property rights  Coase and Demsetz assume symmetry which might not exist  They implicitly assume unique equilibrium  Problem: Multiple equilibria
    59. 59. Multiple equilibria
    60. 60. Solutions  In these cases, solutions have to be revealed to producers  Sometimes solutions have to be imposed
    61. 61. Sustainability and exhaustible resources  In some basic sense nothing is truly sustainable since finite resources are continuously exhausted by man but also by nature  Sustainability has thus evolved to mean a “correct” relationship between generations  Dasgupta has suggested that net wealth rather than income should be considered in this relation  Net wealth is accumulated social, economic and institutional capital minus depreciation for natural resources exhausted
    62. 62. Sustainability continued  Sustainability means that resources should be as much as possible preserved for future generation’s use  The net wealth criteria tells us that some countries like India have GDP growth but decreasing net wealth while Western countries have increasing net wealth and income Africa, decreasing net wealth and income  Clearly this means that slowly renewable and exhaustible resources should be depleted at an optimal rate.
    63. 63. Theory of slowly renewable resources  Slowly renewable resources have to be evaluated as an evolving stock such as a population minus withdrawals ( ) ( ) ( , )1 d z d t H z F z N x= − Evolution of z = Natural Dynamics of z minus catches
    64. 64. Slowly renewable resources: Production  Producers will be drawn into using the stock by profits: ( ) ( , ) 2 d x d t q F z N x p N x N = − µ Evolution of inputs x, if average profits are positive, if F is production, q unit price, p unit costs
    65. 65. Equilibrium conditions  In equilibrium there should be an optimal level of the resource z if: ( )( ) ( , ) e x p3 0 q F z N x p N x N r t d t −      − ∞ ∫ Is maximized subject to the relation before and where r is a discount rate: The discounted sum of all future profits is maximized with a discount rate r, the spot price of the resource is thus dependent on availability of z in nature and the discount rate
    66. 66. Exhaustible Resources  Hotelling Principle:  An exhaustible resource is an asset and its net price (market price - extraction costs) should increase exponentially with the interest (or discount rate, to some extent a socio-political construct), i.e.: P(t) = P(0)eit or (dP/dt)/P = I Indeed if for the resource Z, the price is P.Total value of resource:PZ. Compare to other assets, P has to grow as P(0)eit to stay competitive.
    67. 67. Hotelling’s Principle:  Competitive resource owners will deplete at a socially optimal rate  Take r the rate if return to the owner of natural resources. In equilibrium : r = i  Whenever, r … i, we have a conservationists dilemma.
    68. 68. Conditions for Hotelling principle  1. No externalities  2. No uncertainty about future sales, exploration prospects, etc.  3. No extraction with environmental externalities (ex. Gold Rush).  4. Not too big differences between private and market (social) discount rate (for instance due to dangers of transfer within society)
    69. 69. Example:Deforestation processes  According to Hotelling principles a forested area is a particular type of asset whose capitalized value should grow with the interest rate. If this growth is not achieved other assets including agricultural ones will be closer and the forested land will either sold for development or transformed into another agricultural asset.  In particular:If the income flow stemming from the forest is lower than the income flow from other activities then deforestation will occur!
    70. 70. This can be due to:  subsidies for agricultural production  income subsidies or welfare  cost of property rights enforcement  prohibition of trade  unclearly defined property rights
    71. 71. Graphical analysis
    72. 72. Population Dynamics  Fundamental problem of global environmental change: Balance supply of resources from physical system with demand for these resources from human populations over time
    73. 73. Population dynamics  Fertility  Mortality  Migration  Population size  Age distribution
    74. 74. Measuring Population  Static: characteristics  Total  Age distribution  Genders  Urban/rural  Geographic distributions  Dynamic: use various extrapolation techniques to predict future trends
    75. 75. Measuring Population  Challenges in achieving accurate assessment  Completeness and accuracy  Census comparability  Different interpretations of categories  Different areas/levels of aggregation  Different time periods  Size of area  Units
    76. 76. Projections  Dependent on accuracy of initial conditions (i.e. count)  Need techniques of projection  Postulate relationships among the different aspects of population so you can have internally driven system.  But projections assume smooth path. Also need to introduce mechanisms to account for changes in rates
    77. 77. Malthusian theories of population  Assumptions  Constant "passion between the sexes"  Finite earth  Argument:  Left unchecked, population grows and, by definition, grows exponentially (passion)  After an initial period of strong growth, output as a function of population (labor) exhibits diminishing returns
    78. 78. Preventive checks  Late marriage  Celibacy  Low marital fertility (spacing)  Contraception  Migration Positive check: Mortality
    79. 79. Alternatives to Malthus: Boserup/Simon  Relate technological progress to population growth  Population concentration leads to higher likelihood of technological advance.  Population growth  longer hours,  More labor-intensive techniques  eventually leads to more sophisticated technology.
    80. 80. Multiple influences on population dynamics  Demographic influences on fertility  Institutional controls  Property rights  Production systems and technologies
    81. 81. Pre-industrial Western European Demographic Regime  High mortality  High Fertility  Fertility Controls  Celibacy  Age at marriage  Spacing behavior  Contraception
    82. 82. Limits to Malthusian Approach  Explaining emergence of new demographic regimes  How technology might explain shifts  These considerations important, because new regimes have emerged Synthesis argument: Lee, Ronald, Malthus and Boserup: A Dynamic Synthesis, In David Coleman and Roger Schofield, The State of Population Theory, Oxford: Basil Blackwell, 1986.
    83. 83. Demographic Transition  Characterized by a drop in marital fertility  Achieved through "stopping" behavior, i.e. controlling births after having the desired number of children
    84. 84. Demographic transition  Puzzle  Not linked to decreased mortality  No obvious link to Industrialization  No Malthusian population response to income growth
    85. 85. Fertility Declines, Real and Projected 1 2 3 4 5 6 7 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 ChildrenperWoman (2.1=nopopulationgrowth) Developing Developed Africa Asia South and Central America
    86. 86. Stabilization Remains a Challenge 0 1 2 3 4 1950 2000 2050 StabilizationRatio(births/deaths) (1=nopopulationgrowth) Developing Developed Africa Asia South and Central America
    87. 87. Sub-Saharan African Fertility Regime  Low age at marriage  Polygyny: men have many wives, leaving few women celibate  Acceptance of pre-marital and extra-marital sexual relations  Remarriage after widowhood or divorce is the norm  These are all factors that make women susceptible to childbearing throughout their reproductive period of 15-49.
    88. 88. Differences Pre-industrial European and African Regimes  Europe: reduce "exposure"  Africa: spacing behavior
    89. 89. Characteristics of Sub-Saharan African Social System  Poorly defined or poorly enforced common property systems  Children reared communally (polygyny)  Share “costs” in time or responsibility  Weak conjugal bonds  Lineage holds land  Large families have access to larger share References: Dasgupta; Partha, The Population Problem: Theory and Evidence Journal of Economic Literature, 33, 4, 1995: 1879-1902; Chichilnisky, Graciela, North-South Trade and the Global Environment, The American Economic Review 84 (4): 851-874.
    90. 90. Changes in life expectancy in selected African countries with high and low HIV prevalence: 1950 - 2005 with high HIV prevalence: Zimbabwe South Africa Botswana with low HIV prevalence: Madagascar Senegal Mali Source: UN Department of Economic and Social Affairs (2001) World Population Prospects, the 2000 Revision. 30 35 40 45 50 55 60 65 Lifeexpectancy(years) 1950– 1955 1955- 1960 1960- 1965 1965- 1970 1970- 1975 1975- 1980 1980- 1985 1985- 1990 1990- 1995 1995- 2000 2000- 2005
    91. 91. 0 10 20 30 40 50 60 70 Cambodia Haiti Mozambique Rwanda Côte d'Ivoire Zambia Kenya South Africa Zimbabwe Botswana Life expectancy at birth (years) Predicted life expectancy Loss in life expectancy due to HIV/AIDS Source: U.S. Census Bureau, 2000 Predicted loss in life expectancy due to HIV/AIDS in children born in 2000
    92. 92. Population and environment: Key points  Population dynamics in part create “demand” for environmental resources by determining population sizes and distributions  Other factors: tastes/lifestyles; technology  Importance of understanding mechanisms linking fertility—mortality—migration and relation between these demographic processes and other socio-economic variables
    93. 93. Two views of population—resource interaction  Population grows until limited by resource availability (at all levels of technological development). Ultimately checked by mortality: Malthus  Population growth stimulates technological development which permits higher levels of population: Boserup/Simon
    94. 94. Problem: How to account for new regimes?  Malthus perspective could not account for shift from high fertility—high mortality to low fertility—low mortality first in Europe then, progressively, globally
    95. 95. Demographic transition: the definition  “Pre-transition” Western Europe characterized by high fertility and high mortality  “Transition” defined as a drop in marital fertility that in Western Europe was achieved by “stopping” behavior  Conscious limitation of family size once a desired number of children born
    96. 96. Demographic transition: the evidence  Shift from high to low fertility was a result of deliberate family limitation  Transition occurred rapidly once it began  To date, process has been irreversible
    97. 97. Causes: Early theories  Link to modernization: Frank Notestein (1944)  “New ideal of the small family arose in the urban industrial society.  It is impossible to be precise about the various causal factors, but apparently many were important”  Individuality  Mobility  Education  Declining mortality  Costs of children
    98. 98. The standard model
    99. 99. Transition: the European-US data  Great variation in socio-economic and demographic conditions  Timing and extent of decline in mortality  France and USA  Infant mortality varied  Extent of urbanization differed at transition  France 1800: 70% male labor force in agriculture  England 1892: 15% male labor force in agriculture
    100. 100. Transition: Developing countries  Link to mortality seems more direct  Knowledge and treatments not available at time of initial transition in Europe and often precedes fertility decline  Role AIDS epidemic as Malthusian control in high fertility regions  Sub-Saharan Africa either slow to adopt transition or exhibits special characteristics
    101. 101. Questions for future  Evolution of African population patterns  Response of regions where population below replacement rate  Lower population levels  Pro-natalist policies  Role of migration in redistributing population  Prediction difficult since mechanisms of previous transitions are still under debate
    102. 102. Environment and Migration  Migration constitutes, as mentioned before, a significant factor in population dynamics  Migration and the environment are linked in 2 important ways:  Some migrations are environmentally induced: ex. The dust bowls in the US, the Sahel  Migrations create environmental problems: crowding effects
    103. 103.  There are two basic theoretical considerations about migration which emphasize either push or pull factors  Voluntary migration: migrants decide to move from one place to the other on the basis of some incentives, wages, quality of life  Involuntary migrations: migrants are excluded from a given society and are forced to leave  This 2 causes can combine themselves Before we look at these links let’s consider theoretical approaches to migration
    104. 104. Involuntary migration  A description of the multiple aspects of involuntary migration is included in the Zollberg article: political, racial or religious reasons  The collective good literature helps to understand exclusion processes  Other countries often are reluctant to accept these populations which are then concentrated in relatively small areas and cause environmental problems
    105. 105. Voluntary Migrations  Since voluntary migrations are based on incentives to move, these incentives have to be made explicit in the form of wage differentials for instance  Migration due to wage differential constitutes the main explanation for migrations in economics  A standing puzzle lies in the explanation of overcrowding of big developing country cities
    106. 106. Harris Todaro Model  These 2 authors postulate a 2 sector rural (agricultural) and industrial economy  Wages in agriculture are: WA=P.q’  Wages in industry are dependent upon a minimal wage Wmin They are: 1, min ≤= U M U M U N N N NW W
    107. 107. Equilibrium conditions  As long as the following is >0, migration will occur 0',' min >      −= ψψ Pq N NW N U M U  N Is a time evolution (derivative)
    108. 108. Other Factors Could Be Important As well  The pull aspect of cities exists before Minimal wage policies are applied  The pull aspect is enhanced by existing social networks that support newcomers  Increasing returns to scale in cities  High paying but difficult to enter jobs  Segmented labor market
    109. 109. Increasing Returns
    110. 110. Other incentive models: The Owen land use model  The land use model developed by Owen assumes only two types of land use, agriculture and dwelling and examines the special case of areas around urban centers  Whether land will be transformed into dwelling will depend on income streams generated by both  Arrival of newcomers increases income streams from dwellings especially if migrants get subsidies
    111. 111. Conclusions of Owen model and further development  Even under normal conditions, as long as there is an attraction to moving into an urban area such as a subsidy or the hope of a job, farm land will be urbanized down to a critical value which can be very close to zero.  Higher interest rate for agricultural investments as opposed to investments for urban dwellings will accelerate the process.
    112. 112. Further conclusions  Mass migration which can result from climate change will accelerate this process.  Foreign aid and relief can accelerate the process  An Ill-defined property right regime will initially slow but then accelerate the process.  Climate change might reduce net profits made from agricultural production and accelerate the process.
    113. 113. Trade and Environment  From a general point of view, trade and the environment should be neutral with respect to each other  Problems come from the different political social and legal structures between countries  These lead to either advantageous or problematic relationships between the two
    114. 114. Positive and negative effects  Environmental conditions can be positively affected by trade liberalization  Positive effects can result from the suppression of distortions which have all kinds of costs including environmental ones  Other legislation than trade legislation might create distortions: environmental standards  A market economy and this is due for trade as well can work optimally only if some structural conditions are similar such as property rights  To make all this explicit lets look at trade theories
    115. 115. Property Rights, the Environment and Trade  Changes in the Economic Theory of Trade  Traditional Theory Based on the Notion of Comparative Advantage: Heckscher Olin  2 New Notions:  Importance of Increasing Returns to Scale and Intra-Industry Trade (Helpman, Krugman, Ethier, etc.)  Importance of availability of a factor and factor prices (Chichilnisky)
    116. 116. Characteristics of Trade  Importance of increasing returns in  External aspects  Monopolistic competition  Some property rights regime lower the price of factor inputs  Countries with ill-defined property rights extract too many natural resources  They have thus an "artificial" comparative advantage in environmental goods
    117. 117. The Chichilnisky Perspective  Chichilnisky (1994) has analyzed trade links between regions with different property rights  Basic conclusions are drawn from her investigation:  The region with undefined property rights will supply more of a resource at any price  This applies to any good that is "fugitive" : rights of ownership established only when captured or freely extractable
    118. 118. Open access and “private” supply
    119. 119. Chichilnisky Perspective  This situation creates an "abundance" of the resource in the region without or with ill-defined property rights  The region will "appear" to have a comparative advantage in the given resource.  Abundance is not due to any intrinsic natural availability of the resource but only to the absence of rights.  The region without property rights will get poorer because it will get rid of its resources at too low a price.
    120. 120. Chichilnisky: Analysis  Assumptions about the region without well defined property rights:  elasticity of substitution between leisure and consumption for harvesters or extractors of the resource good that is lower than 1  extractors consume mostly other goods than the natural resource that are purchased with their harvest or catch  An increase of the relative price of other goods with respect to the resource will result in more extraction
    121. 121. Consequences  Regions with ill-defined property rights are "exploited" those with well defined rights.  Resultant lower prices lead to increasingly unfavorable terms of trade followed by more extraction of the resource  Thus regions with poorly defined property rights grow poorer as a result of trade with regions with better defined property rights  More important, corrective taxes are counterproductive: lower demand and lower prices lead to more extraction
    122. 122. Analysis of Countries with Ill- Defined Property Rights  These countries are sensitive to price fluctuations due to substitution effects or taxation policies  Lower prices lead to more extraction of natural resources due to a lowering of the opportunity cost of labor  This lowers their bargaining power at the international level  Their bargaining power is lowered further by the cost of the artificial "comparative advantage" in terms of natural resources on the society as a whole which might lead to social upheavals.
    123. 123. Environment and trade policies  One has to distinguish here between production and consumption  The prevalent norm and WTO rule is that consumption can be regulated with respect to environmental standards (up to a point) by national legislation  No such leeway exists for production methods (ppm problem)
    124. 124. Conflict, cooperation, and the environment  The relations between conflict, cooperation and the environment are numerous but cannot always be clearly established  Quite clearly early cooperative structures such as early agricultural states were driven by the necessity to better control the human environment  Resource driven conflicts are probable in this context
    125. 125. Relationships between the environment and human production  As technology evolves, the relations between the environment and human activities become more distant  2 types of relations can be emphasized: 1. Cataclysmic Events such as volcano eruptions  Long term changes such as deforestation trends and climate changes: the 2 may be linked
    126. 126. Conflicts over environmental resources may exist but they are difficult to show  Difficulty to disentangle environmental form other conflicts, ex. Rwanda  Here again importance of property and property rights  Similar for conflict over resources: Central Asia and Water in the Jordan river water basin, conflict between Turkey, Syria and Iraq over the Euphrates and Tigris waters
    127. 127. The Central Asian Water Question
    128. 128. Symmetric and Asymmetric Access to Resources: The Example of the Middle East
    129. 129. 2 Middle Eastern Conflicts: The Jordan and Euphrates River Basins  Jordan River: Israel plus Palestinians use about 2300 million cubic meters per annum, only 1950 is considered sustainable  Jordan uses 740 to 750 million cubic meters per annum. Only 730 is considered sustainable  Euphrates: Turkey reduces Euphrates flow to 500 to 300 cubic meters per second, 700 are demanded by Syria
    130. 130. Some Theoretical Notions  Goal: tackle problems analytically and suggest responses that tend to promote strategies to minimize conflicts and promote cooperation  All social interactions and conflicts are not the same. They have to be analyzed according to their incentive structures  Water problems are also common problems  Commons lead to asymmetries: Lack of dominant strategies lead to first mover advantage  First, (or second) move advantage can be enhanced by geographic or technological circumstances
    131. 131. Fundamental Questions to Address  What are the nature of the conflicts  How can one find optimal solutions to solve them?
    132. 132. Water competition has technological and economic limits  Price of Water from Sea: fundamental  Given by the cost of a m3 of water from sea water or possibly from pipe lines: Around 65¢ per m3  70% of all consumed water is for agriculture (irrigation)  In the Middle East this proportion can reach 80 to 90 %  Is it worth it?
    133. 133. Symbolic aspects  The sharper the conflict and the demands around it, the more is at stake  Giving in on little things is perceived as signal to give in on big ones
    134. 134. How to get out of the conflict spiral?  Emphasize limited worth of conflict  Franklin Fisher approach using pricing  Problem: Symbolic aspect  Policy of mutual voluntary restraint in use  Reduce conflict extensions to other areas through compensations
    135. 135. Difficulty: The Mid-east population explosion Graph 6 Population Jordan: Observed and Calculated Values 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 1970 1971 1971 1972 1973 1974 1974 1975 1976 1977 1977 1978 1979 1980 1980 1981 1982 1983 1983 1984 1985 1986 1986 1987 1988 1989 1989 1990 1991 1992 1992 1993 1994 1995 1995 1996 Years Population(Millions) Calculated Values Observed Values
    136. 136. The Mid-East Demographic Boom
    137. 137. Per capita GDP diminish in the Mid- East
    138. 138. Row Column (3,3) (4,1) (2,2) C C C C Prisoner’s Dilemma (1,4) (2,2) Row C C Row Column (3,3) (4,2) (1,1) C C C C Chicken
    139. 139. Environmental Negotiations  The Common problem makes it difficult to carry out international environmental negotiations  Often countries try to free ride on each other  It is difficult to exclude from environmental benefits
    140. 140. Unit veto and leader problem  Unit Veto makes agreements even more difficult  Particular importance of players  One has to find ways to exclude  Side payments have to be provided  Importance of a leader, US for Montreal, EU for Kyoto

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