CURBSIDE RECYCLING: WASTE RESOURCE OR WASTE OF RESOURCES?

Replaced with revised version of paper 07/28/04.Environmental Economics and Policy, Public Economics,

Cheap Talk Revisited: New Evidence from CVM

Two recent studies have shown that “cheap talk” is an effective means of eliminating positive hypothetical bias in experimental and field-auction settings. We further investigate the ability of cheap talk to mitigate positive hypothetical bias in a CVM phone survey administered to over 4,000 households. Positive hypothetical bias is detected in our data by contrasting revealed and stated preference information. However, a short, neutral cheap-talk script appears to exacerbate rather than mitigate the bias. Based on this and mixed evidence from earlier studies, we suggest caution in using cheap talk as an ex ante control for hypothetical bias.cheap talk, hypothetical bias, contingent valuation

Curbside Recycling: Waste Resource or Waste of Resources?

In this paper, we estimate the social net benefits of curbside recycling. Benefits are estimated using survey data on household willingness to pay (WTP) from over 4,000 households across 40 western U.S. cities. We calibrate WTP for hypothetical bias using an experimental design that contrasts stated and revealed preferences. Cost estimates are compiled from previous studies by the U.S. Environmental Protection Agency, the Institute for Local Self Reliance, as well as from in-depth interviews with recycling coordinators in our sampled cities. Remarkably, we find that the estimated mean social net benefit of curbside recycling is almost exactly zero. Therefore, the decision of whether to implement or maintain a curbside recycling program (CRP) must be done on a city-by-city basis.curbside recycling, willingness to pay, social net benefits, hypothetical bias, calibration

Carbon Sequestration and Permit Trading on the Competitive Fringe

This paper makes two contributions to the carbon-sequestration literature. The first is the development of a theoretical framework in which sequestration and permit trading are analyzed jointly in the context of a competitive fringe model. The second is a numerical analysis demonstrating the role market structure, or market power, might play in the determination of an equilibrium sequestration allocation and carbon price. We present three comparative-static cases, the first two of which assess the impact of relative changes in the cost structures of the dominant firm and competitive fringe. For these two cases we find that the equilibrium allocation of sequestration aligns with a higher carbon price when the competitive fringe experiences an increase in its marginal cost parameter. Conversely, the carbon price falls when the dominant firm experiences a decrease in its marginal cost parameter. In a third case we evaluate the impact of stricter regulation on the abatement decisions of the polluting firm. Our results demonstrate the importance of incorporating into empirical supply-side models demand-side information that is reflective of an underlying market structure

GIS-Based Estimation of Marginal Implicit Prices of Housing Amenities: The Case of High Ground and Stagnant Streams

We use GIS and econometric methods to estimate the marginal implicit values of environmental amenities associated with residential land parcels in the mountain town of Logan, Utah. Amenities include proximity to open spaces (such as parks, golf courses and lakes), commercial zones, major roads, streams, and general visibility of surrounding topography in the valley as determined by the elevation of the land parcel. The amenity value estimates are corrected for spatial autocorrelation. We find spatially dependent relationships between (1) a parcel’s value and its elevation, and (2) a parcel’s value and its adjacency to a stagnant stream. To our knowledge, this is the first hedonic study to assess the effect of stream stagnancy on land value

Uncertainty and the Voluntary Provision of a Pure Public Good in a Two-Moment Decision Model

In this paper, we explore the potential benefits of uncertainty that may arise in a two-moment model of the voluntary provision of a pure public good. We find that an increase in a given contributor i’s risk associated with the aggregate contribution level of the other contributors (i.e., an increase in social uncertainty) induces that contributor to increase his own contribution level if and only if the uncertainty\u27s incremental effect on the expected value of his net marginal utility is negative. Contributor i’s welfare likewise increases when a closely related condition is met, namely that the uncertainty\u27s marginal effect on his expected marginal utility value of the public good exceeds its countervailing effect on the numeraire. Further, the corresponding aggregate contribution to the public good increases in the presence of free-riding if and only if the incremental effect of contributor i’s contribution on the aggregate expected value of all other contributors’ net marginal utilities is small-enough positive. We derive similar conditions for the case of private uncertainty, where the increase in contributor i’s risk is associated with his own marginal valuation of the public good. A simple example illustrates these conceptual results. Numerical analysis demonstrates that an increase in private uncertainty can have a nonmonotonic impact on contributor i’s welfare

Habits and Externalities

We develop a conceptual model characterizing two types of individuals: one myopic and the other hyperopic. A myopic individual ignores his private contributions to both a social and private negative externality, as well as the effect that his accumulation of stuff (i.e., the stock of consumption goods) has on his habit parameter. A hyperopic individual internalizes both externalities as well as his habit-formation effect. We find that the hyperopic individual consumes a greater amount of a clean good and a lesser amount of a dirty good, with the magnitude of the latter difference being greater than the magnitude of the former. Consequently, the hyperopic individual\u27s cumulative consumption of the two goods is lower. The hyperopic individual\u27s lower cumulative consumption also contributes to a less-persistent consumption habit. Further, we explore the extent to which the allocation of consumption across the clean and dirty goods made by an astigmatic individual (an intermediate type of individual who internalizes the private externality, as well as the habit-formation effect) diverges from the myopic individual\u27s allocation. We consider the implications of our findings for traditional environmental tax policy as it applies to myopic and astigmatic individuals. Conceptually, we find that Pigovian tax rates in the presence of habit formation diverge from corresponding standard rates that ignore habit formation based on the difference between the magnitudes of the cumulative marginal benefit associated with habit formation and the marginal cost associated with the accumulation of stuff. Results from a simple numerical analysis demonstrate these conceptual results and more

The Simple Economics of Conservation Clubs

This paper examines how a regulatory authority might ideally promote the formation of “conservation clubs” among households in order to initiate and empower voluntary household-level water and energy conservation efforts. We characterize a socially optimal conservation benchmark and derive the conditions necessary for a club to effectively attain this benchmark on behalf of the wider community. Both theoretical and numerical analyses are used to demonstrate ways in which households choose to become club members and are subsequently empowered to undertake conservation efforts. The avenues through which club membership might empower households include (1) information provision/education that is assumed to alter key parameters of the household’s welfare function, thereby inducing the household to build a stronger “conservation ethic,” and (2) bulk-pricing arrangements that reduce the prices of applicable conservation technologies. Our results highlight key relationships between the regulator and households, as well as between the club and the marketplace, that should be measured empirically before efforts are made to establish conservation clubs in practice

Missing the Warning Signs? The Case of Yellow Air Day Advisories in Northern Utah

Using a dataset consisting of daily vehicle trips, PM2.5 concentrations, and a host of climactic control variables, we test the hypothesis that “yellow air day advisories” issued by the Utah Division of Air Quality resulted in subsequent reductions in vehicle trips taken during northern Utah’s winter-inversion seasons in the early 2000 s. Winter inversions occur in northern Utah when PM2.5 concentrations (derived mainly from vehicle emissions) become trapped in the lower atmosphere, leading to unhealthy air quality over a span of time known colloquially as “red air day episodes”. When concentrations rise above 15 μg/m3 toward the National Ambient Air Quality Standard average daily threshold of 35 μg/m3, residents are informed via different media sources and road signage that the region is experiencing a yellow air day, and are urged to reduce their vehicle usage during the day. Our results suggest that the advisories have provided at best weak, at worst perverse, incentives for reducing vehicle usage on yellow air days and ultimately for mitigating the occurrence of red air day episodes during northern Utah’s winter inversion seasons