环境与自然资源经济学教师手册 M04_TIET1380_08_IM_C04

Chapter 4

Property Rights, Externalities, and

Environmental Problems

Chapter 4 focuses on the inefficiencies caused by the lack of well-defined property rights. Many environmental problems stem from inefficient property right structures. Different types of property rights regimes will lead to different allocations. This chapter discusses how many environmental goods and services will be underprovided under certain property rights regimes while environmental “bads” will be over provided. Markets and market failures are emphasized. The role for the government is introduced. Much of this chapter is material and concepts that students who have had introductory microeconomics should be familiar with. This may be, however, the first time they will have seen microeconomics concepts applied to environmental issues.

Teaching Objectives

1. Define property right.

2. Define an efficient property right structure.

3. Illustrate with a real life example how well-defined, exchangeable property rights will lead to

economic efficiency.

4. Review conceptually and graphically consumer surplus, producer surplus and the maximization of net

benefits.

5. Define externality or third party effect and illustrate market failure in the presence of an externality.

Use examples to illustrate both positive and negative externalities.

6. Define scarcity rent.

7. Distinguish between various property rights regimes, including private property, common property

resource regimes, and open access resources.

8. Illustrate how open access regimes lead to overexploitation, and explain the tragedy of the commons.

9. Define public goods. Define free-rider.

10. Illustrate other market imperfections such as the effects of monopoly power.

11. Define and illustrate the concept of a cartel.

16 Tietenberg/Lewis •Environmental and Natural Resource Economics, Eighth Edition

12. Discuss the effects of discount rates on allocation decisions. Examine the reasons for the divergence

of social and private discount rates.

13. Define rent seeking and government failure.

14. Discuss remedies for negative externalities.

15. Define the Coase Theorem.

Outline

I. Property Rights

This section focuses on illustrating economic efficiency associated with well-defined property rights.

This might be a good point to review or remind your students what economic efficiency means and how it can be illustrated graphically. Consumer and producer surplus are introduced in this section.

By starting with efficient allocations and showing how producer and consumer surpluses (and thus net benefits) are maximized, it will be easier to illustrate inefficient allocations and convince your students of the associated problems.

A. A property right is an entitlement held by either an individual or a state.

B. A well-defined or efficient property right will be:

1.Exclusive: All benefits and costs accrue only to the owner.

2.Transferable: Property rights can be exchanged voluntarily.

3.Enforceable: Property rights cannot be encroached on by others.

Owning a resource with these characteristics ensures that the resource will retain both its use

value and its asset value. Resources for which the asset value cannot be captured will typically

be overexploited (e.g., common pool resources). This concept will be covered later in the chapter,

but it might be a good point to remind your students of the concepts of opportunity cost and

introduce them to the idea of intertemporal opportunity cost in addition to contemporaneous

opportunity cost. These concepts will be useful throughout the text.

C.Consumer surplus is willingness to pay minus the actual payment or the area under the demand

curve and above the price. Consumers will decide how much to purchase by maximizing his or

her own individual benefit.

D.Producer surplus is the area above the marginal cost (supply) curve and below the price. This

is the net benefit received by the seller.

benefit equals the sum of consumer and producer surplus. If the market clears and all social

costs are internalized, net benefits will be maximized. If net benefits are not maximized, the

allocation is inefficient.

F. In the short run, producer surplus is equal to profits plus fixed cost. This is because the area

under the marginal cost curve is total variable cost. In the long run, producer surplus is equal

to profits plus rent. Rent is the return to scarce inputs owned by the producer. Under perfect

competitions, long-run profits equal zero and producer surplus equals rent. [Remind your

students that economic profit is not the same as accounting profit.]

G. Scarcity rents are the returns that persist in the long-run competitive equilibrium.