CHAPTER 22
ECONOMICS, PUBLIC POLICY, AND THE ENVIRONMENT

I. Economics and Public Policy

A. Public Policy
1. What is Public Policy?
2. What role does public policy play in our lives?

B. Relationships between Economic Development and the Environment
1. A healthy economy needs a healthy environment
2. What is an ecological economist?

Fig. 23.1 Some of the most serious environmental problems can be improved with income growth, others get worse and then improve, and some problems just get worse.
Fig. 23.2 Land (meaning natural resources), labor and capital are the three elements constituting the "factors of production." Economic activity involves the circular flow of money and products.
II. Resources and the Wealth of Nations

A. The Wealth of Nations
1. Natural Capital  may obtain from within or from outside the country
2. Human Resources
3. Produced Assets

B. Resource Distribution
1. Disparities between Nations
2. Disparities within Nations

Fig. 23.3 The natural environment encompasses the economy, which is constrained by the resources found within the environment.
Fig. 23.5 Developed countries have most of the world's wealth.
III. Pollution and Public Policy

A. Public Policy Development: The Policy Life Cycle
1. Recognition State
2. Formulation Stage
3. Implementation Stage
4. Control Stage

B. Economic Effects of Environmental Public Policy

1. Costs of Policies
a. Those involving little or no direct monetary cost
b. Those involving costs that must be paid by some segment of society. The cost
should be borne by those benefiting from the activity that produces the pollution.

2. Impact on the Economy
a. An economy stimulant
b. Creates jobs
c. Transfers wealth from polluters to pollution controllers and to less polluting
companies.
Fig. 23.6 Most environmental issues pass through a policy life cycle in which an issue is accorded different degrees of political "weight" as it moves. The final result is a policy that has been incorporated into the society and a problem that is under control.
Fig. 23.8 Different environmental problems are in different stages of the policy life cycle in industrial societies.
Fig. 23.9 This is an estimate of total yearly costs of pollution control in the U.S. The estimate assumes full implementation of existing regulatory laws.
IV. Methods to Evaluate Public Policy Options

A. Cost-Benefit Analysis

1. The merits of the goal are not necessarily known or accepted. In a cost benefit
analysis the attempt is to determine if the action is worth the cost.
2. Brings external costs into the equation.
3. Difficult and controversial to do because the process is filled with value judgments
4. The Costs of Environmental Regulations
a. Pollution prevention rather than pollution control to reduce costs and increase
compliance
5. The Benefits of Environmental Regulations
a. Attempt to quantify benefits but not easy
·The value of human life
·Non-human environmental components

B. Cost Effectiveness

1. The merits of the goal are accepted. In a cost effectiveness analysis the attempt is
to find the least costly way to achieve the goal.

V. Progress

A. What Have We Gained through Public Policy?

1. Air Quality Improvements
2. Water Quality Improvements
a. Decreased eutrophication
b. Rivers that are not flammable
c. Lakes that have recovered from death
3. Improved Public Health
a. Decreased blood lead levels
b. Decreased incidence of gastrointestinal illnesses
4. Improved Handling of Solid and Hazardous Waste
Fig. 23.10 The cost of pollution control increases exponentially with the degree of control to be achieved. However, benefits derived from pollution control tend to level off and become negligible as pollutants are reduced to near or below threshold levels.
Fig. 23.11A Pollution-control strategies generally demand high initial costs. The costs then generally decline as those strategies are absorbed into the overall economy.
Fig. 23.11B Benefits may be negligible in the short term, but they increase as environmental and human health recover from the impacts of pollution or are spared increasing degradation.
Fig. 23.11C When the two curves are compared, we see that what may appear as cost-ineffective expenditures in the short term (5-10 years) may, in fact, be very cost effective in the long term.