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Quiz Three Econ. 45535 -Natural Resource EconomicsFall 19991. (5 points) Why do you think that the management arm of the conservation movement (acurrent proponent of this philosophy is the U.S. Forest Service, etc.) has concentratedmore on the production of produced goods and services from natural resources rather thanthe potential flow in services from in situ natural resources? Historically, was this a goodpolicy for the Forest Service to adopt? Does it remain a good policy? The services from in situ natural resources include recreation in natural areas, viewing it, knowingsuch areas exist, etc. Such services are “superior” goods as compared to normal and inferior goods; that is, the demandfor such services increases proportionally more than the increase in income when incomeincreases. Since our standard of living has increased substantially in the last 100 years, the demandfor these services has increased significantly relative to the demand for produced goodsand services (e.g. houses, etc). A hundred years ago we were relatively speaking too poorto worry about recreation and the existence of bears in the woods. In addition, we had alot more woods and bears. It is much easier to justify one’s existence if what one produces has a market price. Existencevalues and recreational values are much more difficult to estimate. Given this, and ceteris paribus,it is easier for the U.S. Forest Service to justify their worth in terms of produced goods andservices than in terms of recreational use and existence value. At the turn of the century it made sense to concentrate on the preservation of the forest mostlybecause of it potential to produce lumber than because of its value for recreation and existence. In addition, the output from lumber is easy to measure. However, relative demands have changedbecause of the increase in our standard of living, so now relatively more weight should probablybe given to the flow of services from in situ natural resources. This is starting to happen. (Thisdoes not mean we should stop cutting all trees.) We have also progressed significantly in ourability to estimate recreational and nonuse benefits. Other points: Some of you argued that we should preserve more now because the social rate of discount is nowlower. OK but why? Is it related to the increase in the standard of living? Old Gif was a preservationist. He wanted to save tree, he did not want to cut them all down. Hewanted to preserve forests so they would be available in the future to produce lumber.1Remember how we discussed that the preservationist school now has two camps:preserve by leaving it alone, and manage to preserve. Historically, management has meant management to produce and extend the flow of producedgoods and services, but one can manage for other reasons, such as preservation increaserecreation benefits and existence values. In fact, many current preservationists would argue thatone needs to manage to preserve natural areas because there are typically small islands in the seaof non-naturalness, so will be absorbed in left to their own devices.1 Think about our naturalparks. They are highly managed, but not to produce lumber or minerals. 2. (5 points) Senator Gary Hart was once quoted to the effect that "we don't want to justmove pollution around, we want to eliminate it." Discuss.I was amazed at how many of you knew of Gary Hart. They always say that the youngergeneration has no sense of history. I wanted you to think of what Gary said in terms of the MBA, and I am happy to report most ofyou did this well. Interesting, some of you though Gary did not have a clue about MB, other thought he did, andsome of you did not say either way. I interpreted the statement as if he were clueless. Given MB, how to move it around (how to take our poison) is an important policy issue - wehave the ability to modify the form of our emissions by allocating L and K to the process. We can reduce emissions but, if we are currently producing efficiently, this will requirethat we reduce production and consumption. We might want to do this, but only up to apoint. Most of you were very clear about what materials balance means and its implication forenvironmental


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CU-Boulder ECON 4535 - Quiz Three

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