Environmental Policy: Benefits, Ecotourism, and Marginal Costs

All flashcards

What are four broad benefits of cleaner air and water?

They can improve health and longevity, support industries that rely on clean environments, increase property values, and provide enjoyment that does not require a market transaction.

What did the EPA's 1970–1990 Clean Air Act estimates indicate?

The EPA estimated costs of roughly $500 billion and a middle-range estimate of benefits of $22 trillion, about 44 times the costs.

What is the value of a statistical human life?

It is an estimate used to evaluate changes in mortality risk across a population, not a price assigned to a particular person. The EPA estimated it at $7.4 million in 2006 dollars.

What is an opportunity cost in evaluating a safety regulation?

It is the value of other health or safety uses forgone when resources are devoted to the regulation. Spending on one rule may leave fewer resources for other measures that could also save lives.

What is the marginal decision rule for increasing pollution reduction?

Continue while the marginal benefit of the next increment is at least as large as its marginal cost.

Quiz questions

1. What did the EPA's 1970–1990 Clean Air Act study estimate about benefits and costs?Answer: Its middle-range estimate of benefits was about $22 trillion, compared with roughly $500 billion in costs.
2. Why does an overall finding that environmental benefits exceed costs not prove that every regulation is worthwhile?Answer: The balance of benefits and costs can differ among pollutants and individual regulations.
3. How should society decide whether to make one more increment of pollution reduction?Answer: Continue when the next increment's marginal benefit is at least as large as its marginal cost.
4. Why can ecotourism encourage local residents to protect habitats and wildlife?Answer: Tourism revenue can give residents an economic stake in conserving natural resources.
5. Why do economists examine pay differences between otherwise similar risky and safer jobs?Answer: Extra pay for riskier work can provide evidence about how people value changes in mortality risk.