The Economics of Water Resource Allocation: Valuation Methods and Policy Implications

In this chapter a ‘watershed economics approach’ that could be applied in Cyprus is proposed which is composed of two important stages. In Stage I economic valuation techniques are used to establish the economic value of the competing demands for surface and groundwater, incorporating where necessary an analysis of water quality. The valuation exercise allows the objective balancing of demands based upon the equi-marginal principle to achieve economic efficiency. In Stage II a policy impact analysis is proposed which addresses issues of social equity and the value of water for environmental/ecological purposes. The analysis is undertaken within the confines of the watershed; the most natural unit for the analysis of water allocation and scarcity since it determines the hydrological links between competing users and thus the impacts of one user upon another. The methodology is encapsulated by a case study of the Kouris watershed in Cyprus

The Coase theorem and idea of transaction costs – their significance for the development of economics

Ronald Coase drew the attention of main stream economists to the significance of social coordination in the economic system. The key role was played here by much-disputed political conclusions drawn from Coase's idea as well as by his famous theorem and the zero transaction costs theory. The study focuses on the division of labor as a starting point for analysis of zero transaction costs. From this vantage point, the best example of the world of zero transaction costs is Robinson Crusoe's island. However, very often the concept of zero transaction costs is associated with the assumption of perfect information. If we stretch this assumption to its logical limits, then there is no market mechanism and all impediments related to the central planning system disappear. This interpretation is in line with the Hayekian interpretation of the market as a mechanism for acquiring knowledge.Ronald Coase skierował uwagę ekonomistów głównego nurtu na znaczenie społecznej koordynacji w systemie ekonomicznym. Kluczową rolę odegrały tu zarówno kontrowersyjne wnioski polityczne wyprowadzane z idei Coase'a, jak i słynny teoremat i koncepcja zerowych kosztów transakcji. W artykule uwaga skoncentrowana jest na podziale pracy jako punkcie wyjścia do analizy zerowych kosztów transakcji. Z tego punktu widzenia najlepszym przykładem świata zerowych kosztów transakcji jest wyspa Robinsona. Najczęściej jednak koncepcja zerowych kosztów transakcji wiązana jest z założeniem doskonałej informacji. Jeżeli założenie to doprowadzamy do jego logicznych granic nie ma mechanizmu rynkowego oraz znikają wszelkie trudności systemu centralnego planowania. Ta interpretacja jest zbieżna z hayekowską interpretacją rynku jako mechanizmu odkrywania wiedzy

Farmers' behavior and the provision of public goods: towards an analytical framework

The new CAP reform aims to stimulate the role of agriculture as provider of public goods. An analytical framework is developed to model farmers’ decision making and to gain insight into farmers’ behavior in response to a number of policy instruments. The framework integrates characteristics of farm, farmer, market, as well as the policy instruments. Theoretical analysis suggests that attitudes, off-farm employment opportunities, non-pecuniary benefits and expectations of future developments can play important roles in farmer’s decision making regarding the provision of public goods. Empirical research is needed to test the hypothesis

The Diversity of Design of TSOs

International audienceIt is puzzling today to explain diversity and imperfection of actual transmission monopoly designs in competitive electricity markets. We argue that transmission monopoly in competitive electricity markets has to be analysed within a Wilson (2002) modular framework. Applied to the management of electricity flows, at least three modules make the core of transmission design: 1° the short run management of network externalities; 2° the long run management of network investment; and 3° the coordination of neighboring Transmission System Operators for cross border trade. In order to tackle this diversity of designs of TSOs, we show that for each of these modules, three different basic ways of managing them are possible. Among the identified twenty seven options of organisation, we define an Ideal TSO. Second, we demonstrate that 1°monopoly design differs from this Ideal TSO and cannot handle these three modules irrespective of the “institutional” definition and allocation of property rights on transmission; while 2°definition and allocation of property rights on transmission cannot ignore the existing electrical industry and transmission network structure: they have to complement each other to be efficient. Some conclusions for regulatory issues of transmission systems operators are derived from this analysis of network monopoly organisation

When Inefficiency Begets Efficiency.

Collective consumption decisions taken by the members of a household may prove inefficient. The impact of such inefficient household decisions on market performance is investigated. At one extreme, market efficiency can occur even when household decisions are inefficient, namely when household inefficiencies are merely due to inefficient net trades with the market. At the other extreme, market efficiency is bound to fail, if household inefficiencies are solely caused by an inefficient distribution of a household's aggregate consumption to its individual members. This leads us to consider competitive forces as a disciplinary device for households. When households compete for both resources and members then household stability requires efficient or not too inefficient internal distribution.

Consumption Externalities and the Role of Government: The Case of Alcohol

This paper considers the role of government in the case of externalities and, in particular, in the case of alcohol externalities. The purpose of the paper is to assess whether the current level of the alcohol excise can be justified on externality grounds. The paper assesses various mechanisms to address externalities. These mechanisms are institutional solutions, trade in rights to generate externalities, regulatory measures and Pigouvian taxes. The paper assesses these tools in the case of alcohol and concludes that institutional, trade and regulatory solutions are limited in their ability to address the externalities of alcohol. A specific tax can be justified in the case of alcohol. The externalities are large and there is sufficient information on which to base a tax. Given the information constraints the specific tax must be applied uniformly across a rage of units of consumption, rather than to particular individuals. Where an optimal uniform tax is imposed it is reasonable to assume that the amount of revenue collected by the government would be at least as large as the total externality. In 1999/00 the amount of revenue collected from the tax on alcohol was $580 million. This is near the mid-point of the estimated bound of the external tangible costs of alcohol. Thus the current rate of excise tax can be justified on externality grounds.Externalities, Alcohol, Coase theorem, Pigouvian tax

Теоретические аспекты построения оптимальной системы транспортного налогообложения

Целью данной статьи является анализ теоретико-методологических основ построения оптимальной системы транспортного налогообложения с выделением классификационных признаков, функций и принципов построения такой системы. В работе систематизированы экономические воззрения на природу транспортных налогов и представлен генезис транспортного налогообложения. Аргументируется, что генезис исследований в области транспортного налогообложения состоял в развитии экономических обоснований величин компенсаций, развивавшихся по логике от частного к общему, т. е. от компенсации за пользование отдельными объектами дорожно-транспортной сети до обоснования компенсации совокупности всех отрицательных экстерналий и всей дорожно-транспортной сети. Систематизируются функции транспортного налогообложения, проводится анализ двух основных функций: фискальной и регулирующей. Доказывается, что регулирующая функция в транспортном налогообложении является паритетно значимой, анализируются отрицательные внешние эффекты, связанные с форсированной автомобилизацией населения. Кроме того, обосновывается, что чистые общественные блага, используемые при эксплуатации автотранспорта, в процессе массовой автомобилизации трансформируются в смешанные блага, которые в свою очередь сохраняют свойство неисключаемости, но отличаются конкурентностью в потреблении. В результате исследования разработана оригинальная классификация транспортных налогов по основным классификационным признакам, представлены классификации по видам и характеру транспортных платежей, стадиям жизненного цикла транспортного средства, способу взимания платежа, характеру влияния на интенсивность использования транспортного средства и цели его использования. Предлагается система принципов оптимального транспортного налогообложения, включающая известные и оригинальные принципы, развиваются принцип выгоды в транспортном налогообложении и принцип социального оптимума. Сформулированы оригинальные принципы: комплексности, дифференциации, приближенности платежа к услуге, принцип маркировки.The purpose of this article is to analyze the theoretical and methodological basis of building an optimal transport taxation system. That includes establishing classification criteria, functions and principles of building the system. The article systematizes economic views on the nature of transport taxes and outlines the genesis of transport taxation. The article substantiates that the genesis of studies on transport taxation involved the development of economic measures of the size of compensation which followed the special-to-general model, that is, from compensation for the use of particular road network facilities to compensation for the entirety of negative externalities and the use of the whole road network. The article systemizes functions of transport taxation and analyses its two main functions: fiscal and regulatory ones. The article rationalizes that the regulatory function in transport taxation is equally significant. The article analyzes negative external effects resulting from accelerated growth in car ownership. In addition, it substantiates that pure public benefits relating to motor vehicle use tend to transform into mixed benefits in the course of mass car ownership, which, in turn, remain non-excludable, but become rivalrous in consumption. The work presents an original classification of transport taxes based on the main classification criteria. Transport taxes are classified based on types and designation of transport payments, stages of the life cycle of a motor vehicle, the way the tax is levied, the influence it has on the intensity of car use and the purpose of revenue spending. The work offers a system of principles of optimal transport taxation consisting of well-known and new ones. The article further develops the benefit principle in transport taxation as well as the social optimum principle. In addition, it provides definitions for original principles identified by the author: the principle of comprehensiveness, the principle of differentiation, the principle of payment collection at time of service, and the principle of designation