INTERNAL CONSISTENCY IN MODELS OF OPTIMAL RESOURCE USE UNDER UNCERTAINTY

For several decades, economists have been concerned with the problem of optimal resource use under uncertainty. In many studies, researchers assume that prices evolve according to an exogenous stochastic process and solve the corresponding dynamic optimization problem to yield an optimal decision rule for exploitation of the resource. This study is motivated by our attempt to understand the relationship between efficiency in resource markets and optimal harvest decisions in which price is an exogenous state variable. The literature on optimal commodity storage finds that in a rational expectations equilibrium commodity prices are stationary and serially correlated. Yet recent papers on optimal timber harvesting that assume exogenous stationary prices generate harvest rules inconsistent with the price processes on which they are based. In this study, we investigate the appropriate form of the stochastic process governing prices of renewable resources. We develop a model in which timber is supplied by profit-maximizing managers with rational expectations and aggregate timber demand is subject to independent exogenous shocks. In contrast to earlier studies, prices are endogenously determined. Managers know the structure of the timber market and form expectations of future market equilibria in making optimal harvesting decisions. We show under general conditions that efficient timber prices are stationary and serially correlated. Stationarity and serial correlation are shown to arise from two sources: the occurrence of stock-outs (i.e., depletion of the inventory) and stock-dependent growth of the resource. Further, we show that prices retain these properties even in the absence of stock-outs. Simulations are used to further illustrate the analytical results. Our findings have implications for a large number of economic analyses of optimal resource use. First, our results reveal why extraction rules for renewable resources based on exogenous price specifications are internally inconsistent, even when the specification conforms to the stochastic behavior of prices generated by an efficient market. These prices arise in a particular structural environment, and if large numbers of resource managers adopt the harvesting rule, the underlying structural environment would change, and the price process would deviate from that used to derive the harvesting rule. Second, we show that there can be no gains from exploiting the stochasticity of resource prices in a rational expectations world, a finding that challenges the prescriptive policies for resource use found in many studies, including those on option values. Third, our results show that time-series analyses designed to test for the efficiency of renewable resource markets cannot distinguish prices generated in an efficient market from those generated in an inefficient market. Finally, we extend the literature on optimal storage. Previous models of commodity storage models are shown to be a special case of our model involving age-independent depreciation of the inventory.Resource /Energy Economics and Policy,

AGRICULTURAL LAND VALUES AND FUTURE LAND DEVELOPMENT

We develop a theoretical model of land prices and urban expansion and derive a reduced-form expression for agricultural land values. This result dictates the specification of our econometric model in terms of variable choice and functional form. We find strong support for the model in an application to New York.Land Economics/Use,

POLICIES TO REDUCE FOREST FRAGMENTATION: COMBINING ECONOMETRIC MODELS WITH GIS-BASED LANDSCAPE SIMULATIONS

Forest fragmentation is a primary threat to terrestrial biodiversity. We combine a parcel-level econometric model of land-use transitions with spatially-explicit landscape simulations to predict the empirical distribution of fragmentation outcomes under given market conditions and policy scenarios. Our model explains transitions between forest, agricultural, and urban uses, allowing us to model land use change in both rural and urban areas. A Monte Carlo simulation approach links econometrically-derived transition probabilities to GIS maps for the prediction of the spatial properties of habitat change.Resource /Energy Economics and Policy,

Contracting for Impure Public Goods: Carbon Offsets and Additionality

Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important in the use of carbon offsets as part of climate change mitigation. Analyzing optimal contracts for forest carbon sequestration, an important offset category, we conduct a national-scale simulation using results from an econometric model of land-use change. The results indicate that for an increase in forest area of 50 million acres, annual government expenditures with optimal contracts are about $4 billion lower compared than under a uniform subsidy.Carbon Sequestration, Incentive Contracting, Offsets, Additionality

Targeting Incentives to Reduce Habitat Fragmentation

This paper develops a theoretical model to analyze the spatial targeting of incentives for the restoration of forested landscapes when wildlife habitat can be enhanced by reducing fragmentation. The key theoretical result is that the marginal net benefits of increasing forest are convex, indicating that corner solutions--converting either none or all of the agricultural land in a section to forest--may be optimal. Corner solutions are directly linked to the spatial process determining habitat benefits and the regulator's incomplete information regarding landowner opportunity costs. We present findings from a large-scale empirical landscape simulation that supports our key theoretical results.

The Dynamic Behavior of Efficient Timber Prices

The problem of when to optimally harvest trees when timber prices evolve according to an exogenous stochastic process has been studied extensively in recent decades. However, little attention has been given to the appropriate form of the stochastic process for timber prices, despite the fact that the choice of a process has important effects on optimal harvesting decisions. We develop a simple theoretical model of a timber market and show that there exists a rational expectations equilibrium in which prices evolve according to a stationary ARMA(1,1) process. Simulations are used to analyze a model with a more general representation of timber stock dynamics and to demonstrate that the unconditional distribution for rational timber prices is asymmetric. Implications for the optimal harvesting literature are: 1) market efficiency provides little justification for random walk prices, 2) unit root tests, used to analyze the informational efficiency of timber markets, do not distinguish between efficient and inefficient markets, and 3) failure to recognize asymmetric disturbances in time-series analyses of historical timber prices can lead to sub-optimal harvesting rules.

Influence of nutrition on feline calcium oxalate urolithiasis with emphasis on endogenous oxalate synthesis

The prevalence of calcium oxalate (CaOx) uroliths detected in cats with lower urinary tract disease has shown a sharp increase over the last decades with a concomitant reciprocal decrease in the occurrence of struvite (magnesium ammonium phosphate) uroliths. CaOx stone-preventative diets are available nowadays, but seem to be marginally effective, as CaOx urolith recurrence occurs in patients fed these diets. In order to improve the preventative measures against CaOx urolithiasis, it is important to understand its aetiopathogenesis. The main research focus in CaOx formation in cats has been on the role of Ca, whereas little research effort has been directed towards the role and origin of urinary oxalates. As in man, the exogenous origin of urinary oxalates in cats is thought to be of minor importance, although the precise contribution of dietary oxalates remains unclear. The generally accepted dietary risk factors for CaOx urolithiasis in cats are discussed and a model for the biosynthetic pathways of oxalate in feline liver is provided. Alanine:glyoxylate aminotransferase 1 (AGT1) in endogenous oxalate metabolism is a liver-specific enzyme targeted in the mitochondria in cats, and allows for efficient conversion of glyoxylate to glycine when fed a carnivorous diet. The low peroxisomal activity of AGT1 in cat liver is compatible with the view that felids utilised a low-carbohydrate diet throughout evolution. Future research should focus on understanding de novo biosynthesis of oxalate in cats and their adaptation(s) in oxalate metabolism, and on dietary oxalate intake and absorption by cats

The Value of Terroir: Hedonic Estimation of Vineyard Sale Prices

We examine the value of terroir, which refers to the special characteristics of a place that impart unique qualities to the wine produced. We do this by conducting a hedonic analysis of vineyard sales in the Willamette Valley of Oregon to ascertain whether site attributes, such as slope, aspect, elevation, and soil types, or designated appellations are more important determinants of price. We find that prices are strongly determined by sub-AVA appellation designations, but not by specific site attributes. These results indicate that the concept of terroir matters economically, although the reality of terroir--as proxied for by locational attributes--is not significant.

URBAN SPRAWL AND OBESITY

In the U.S., urban sprawl and the rise in obesity rates have been two powerful trends during the latter half of the 20th century. Previous empirical work has found that obesity rates are influenced by labor market outcomes that are fundamentally shaped by the spatial pattern of developed land. We examine these potential linkages in an urban spatial model augmented to include time allocation and weight. Residents maximize utility defined over housing, weight, and food subject to a fixed time budget allocated to commuting, calorie expenditure, and work. We examine how weight is affected by commuting distance, food prices, and the rate of calorie expenditure; how a reduction in transportation costs affects weight throughout the city; and how initial weight affects location decisions. We identify, and explore the significance of, the conditions under which weight gain is associated with common features of sprawl.Food Consumption/Nutrition/Food Safety,

AMENITIES IN AN URBAN EQUILIBRIUM MODEL: RESIDENTIAL DEVELOPMENT IN PORTLAND, OREGON

This paper analyzes the effect of open space and other amenities on housing prices and development density within the framework of an urban equilibrium model. The model is estimated as a system of equations that includes households' residential choice decisions and developers' development decisions and emphasizes the importance of amenities in the formation of development patterns and property values. The model is applied to Portland, Oregon, where ambitious open space programs have been implemented. The results suggest that amenities are important: households are willing to pay more for newer houses located in areas of less dense development, with more open space, better views, less traffic congestion, and near amenity locations. For the developer, increases in housing prices result in an attempt to provide more and larger houses. The attempt to provide more houses, however, results in higher density, which will ultimately reduce prices. A simulation analysis evaluates the policy implications of the model results and indicates substantial benefits from alterations in housing patternsCommunity/Rural/Urban Development, R11, R21, R31,