I’m just going through a backlog of interesting stories to share with my Econ 280 class. First up, Jonathan Adler points us to a short story on a residential subdivision’s successful legal challenge to the construction of a home windmill. The residents of a the Forest Hills subdivision just outside of Carson City, Nevada, argued that the proposed windmill would sully their sight-lines and provide interminable noise from the turning of the rotors. This is a solid example of what Shavell would call an ex ante property rule, and you can read all about it in the Las Vegas Sun.
Speaking of benefits, the fall Journal of Economic Perspectives has another symposium on contingent valuation. Twenty years ago, Peter Diamond and Jerry Hausman famously asked, “Is Some Number Better than No Number?” Although Hausman seems to have found some clarity on the issue, I’d say for the profession the question remains unresolved.
- Catherine L. Kling, Daniel J. Phaneuf and Jinhua Zhao From Exxon to BP: Has Some Number Become Better Than No Number?
- Richard T. Carson Contingent Valuation: A Practical Alternative When Prices Aren’t Available
- Jerry Hausman Contingent Valuation: From Dubious to Hopeless
Next up in the news, we have a consortium of cities and businesses is looking at a $200 million reservoir project to satisfy all its water needs, but it is contemplating paying rice farmers $100 million not to farm instead.
Is this Coasean bargaining inevitable? I wouldn’t bet the farm on it.
Finally, we have Thomas Kinnaman offering the classic economist’s take down of two benefit-cost analyses of shale gas production (i.e., fracking):
The costs of natural gas extraction include, paradoxically, all of the items listed as “benefits” in the two reports discussed above. Natural gas extraction requires labor, capital equipment, pipelines, and raw materials. These economic resources, in a fully employed economy, could have been allocated to other uses. The price paid to secure these resources from these other industries indicates the value of these resources to these other industries (had their value been higher, the market price would have been higher). Thus, the quantity of each economic resource times its market price – in fact 13 the total expenses by the industry as gathered in the surveys – represent the cost of utilizing scarce economic resources to gas extraction.
This block quote is a battle we economists will probably never win. When I tell my students “jobs” are a cost not a benefit, they look at me as if I suddenly began speaking Swahili. The paper is from Ecological Economics, and an ungated version is available here.