1、Chapter 4 Property Rights, Externalities, And Environmental Problems 1. Introduction Main contents: Explore the concept of property rights（产 权） and how it can be used to understand why the environmental asset can be undervalued by both the market and governmental policy. Discuss how the government a
2、nd the market can use knowledge of property rights and their effects on incentives to orchestrate a coordinated approach to resolving the difficult. 2. Property Rights 2.1 Property Rights and Efficient Market Allocations 2.2 Efficient Property Right Structures 2.1 Property Rights and Efficient Marke
3、t Allocations In economics, property rights（产权）（产权） refers to a bundle of entitlements defining the owners rights, privileges, and limitations for use of the resource. The property rights can be vested either with individuals, as in a capitalist economy（资本主义经济）, or with the state, as in a centrally
4、planned socialist economy（中央计划 经济）. 2.2 Efficient Property Right Structures An efficient structure has three main characteristics: Exclusivity（排他性） Transferability（可转让性） Enforceability（可强制执行性） 2.2 Efficient Property Right Structures Exclusivity （排他性）（排他性）means that all benefits and costs accrued as
5、a result of owning and using the resources should accrue to the owner, and only to the owner, either directly or indirectly by sale to others. 2.2 Efficient Property Right Structures Transferability （可转让性）means that all property rights should be transferable from one owner to another in a voluntary
6、exchange. Enforceability （可强制执行性）（可强制执行性） means that property rights should be secure from involuntary seizure or encroachment by others. 2.2 Efficient Property Right Structures An owner of a resource with a well- defined property right has a powerful incentive to use that resource efficiently becau
7、se a decline in the value of that resource represents a personal loss. 2.2 Efficient Property Right Structures When well-defined property rights are exchanged, as in a market economy, this exchange facilitates efficiency. 3. Externalities as a Source of Market Failure 3.1 The Concept Introduced 3.2
8、Types of Externalities 3.1 The Concept Introduced An externality（外部性）（外部性） exists whenever the welfare of some agent, either a firm or household, depends not only on his or her activities, but also on activities under the control of some other agent. 3.2 Types of Externalities External diseconomy （外
9、部不经济性）（外部不经济性） and external economy（外部经济性）（外部经济性） have been used to refer, respectively, to circumstances in which the affected party is damaged or benefited by the externality. Pecuniary externalities （货币外部性）（货币外部性） arise when the external effect is transmitted through higher prices. 4. Improperly
10、Designed Property Rights System 4.1 Other Property Rights Regimes 4.2 Public Goods 4.1 Other Property Rights Regimes Besides private property（私有产权）, there are other property rights regimes: State-property regimes（国有产权制度）（国有产权制度） where the government owns and controls the property. Common-property re
11、gimes（ 共有产权制度）共有产权制度） where the property is jointly owned and managed by a specified group of co-owners. Open access regimes（公开进入制度）（公开进入制度） in which no one owns or exercises control over the resources. 4.2 Public Goods Public goods （公共物品）（公共物品）are defined as those that exhibit both consumption indi
12、visibilities and nonexcludability. Nonexcludability （非排他性）refers to a circumstance where, once the resource is provided, even those who fail to pay for it cannot be excluded from enjoying the benefits it confers. Indivisibility（不可分性） means that one persons consumption of a good does not diminish the
13、 amount available for others. 4.2 Public Goods Can we rely on the private sector to produce the efficient amount of public goods? The answer is no. 4.2 Public Goods Suppose that in response to diminishing ecological diversity （生物 多样性）we decide to take up a collection to provide some means of preserv
14、ing endangered species（濒危 物种）. Would the collection yield sufficient revenue to pay for an efficient level of ecological diversity? 5. Imperfect Market Structures 6. Divergence of Social And Private Discount Rates If resources are to be allocated efficiently, firms must use the same rate to discount
15、 （贴 现）future net benefits as is appropriate for society at large. If firms were to use a higher rate, they would extract and sell resources faster than would be efficient. Conversely, if firms were to use a lower- then-appropriate discount rate, they would be excessively conservative. 6. Divergence
16、of Social And Private Discount Rates Why might private and social rates differ? 6. Divergence of Social And Private Discount Rates The social discount rate（社会贴现率）（社会贴现率） is equal to the social opportunity cost of capital. The cost of capital can be separated into two components: Risk-free cost of ca
17、pital（无风险资本 成本） Risk premium（风险溢价） 6. Divergence of Social And Private Discount Rates The risk free cost （无风险资本成本）（无风险资本成本）of capital is the rate of return earned when there is absolutely no risk of earning more or less than the expected return. The risk premium（风险溢价）（风险溢价） is an additional cost of
18、capital required to compensate the owners of this capital when the expected and actual returns may differ. 6. Divergence of Social And Private Discount Rates One difference between private and social discount rates may stem from a difference in social and private risk premiums. 7. Government Failure
19、 Government failure （政府失灵） shares with market failure （市场失灵） the characteristic that improper incentives are the root of the problem. Special interest groups use the political process to engage in what has become known as rent seeking（寻租）（寻租） . 7. Government Failure Rent seeking（寻租）（寻租） is the use o
20、f resources in lobbying and other activities directed at securing protective legislation. Successful rent-seeking activity will increase the net benefits going to the special interest group, but it will also frequently lower net benefits to society as a whole. 7. Government Failure Why dont the lose
21、rs rise up to protect their interests? One main reason is voter ignorance. 7. Government Failure Rent seeking can take many forms: Producers can seek protection from competitive pressures brought by imports or can seek price floors to hold prices above their efficient levels. Consumer groups can see
22、k price ceilings or special subsidies to transfer part of their costs to the general body of taxpayers. 8. The Pursuit of Efficiency 8.1 Private Resolution through Negotiation 8.2 The Courts: Property Rules and Liability Rules 8.3 Legislative and Executive Regulation 8.1 Private Resolution through N
23、egotiation Private negotiation is the simplest means to restore efficiency when the number of affected parties is small, making negotiation feasible. 8.1 Private Resolution through Negotiation Discussion of individual negotiations raises two questions: Should the property right always belong to the
24、party who gained or seized it first? How can environmental risks be handled when prior negotiation is clearly impractical? 8.2 The Courts: Property Rules and Liability Rules The court system can respond to environmental conflicts by imposing either property rules（产权原则）（产权原则） or liability rules（责任原则）
25、（责任原则）. Property rules （产权原则）（产权原则）specify the initial allocation of the entitlement. 8.2 The Courts: Property Rules and Liability Rules Economist Coase held that as long as negotiation costs are negligible and affected consumers can negotiate freely with each other, the court could allocate the ent
26、itlement to either party, and an efficient allocation would result. The only effect of the courts decision would be to change the distribution of costs and benefits among the affected parties. This remarkable conclusion has come to be known as the Coase theorem（科斯（科斯 定理）定理）. 8.2 The Courts: Property
27、 Rules and Liability Rules When individual negotiation is not practical for one reason or another, the courts can turn to liability rules（责任原（责任原 则）则） which award monetary damages to the injured party. The amount of the award is designed to correspond to the amount of damage inflicted. 8.2 The Court
28、s: Property Rules and Liability Rules Liability rules （责任原则）also has its limitation: It relies on a case-by-case determination based on the unique circumstances for each case. The transaction costs （交易成本）are very expensive. 8.3 Legislative and Executive Regulation These remedies can take several for
29、ms: dictate that no one produce more steel or pollution than Q* impose a tax on steel or on pollution. establish rules to permit greater flexibility and yet reduce damage. require the installation of particular pollution control equipment, or deny the use of a particular production ingredient. 9. An
30、 Efficient Role for Government The economic approach suggests that government action could well be used to restore efficiency, it also suggests that inefficiency is not a sufficient condition to justify government intervention. Objectives & Requirements: l Understand the meaning of property rights a
31、nd the relationship between property rights and efficient market allocations l Grasp the efficient property right structures l Understand the meaning of externality and its contribute to market failure l Understand other sources for market failure l Grasp some methods for pursuing efficiency Problem
32、s: Suppose the state is trying to decide how many miles of a very scenic river it should preserve. There are 100 people in the community, each of whom has an identical inverse demand function govern by P=10-1.0q, where q is the number of miles preserved and P is the per mile price he or she is willi
33、ng to pay for q miles of preserved river. If the marginal cost of preservation is $500 per mile,how many miles would be preserved in an efficient allocation? How large are the net benefits? Problems: Suppose you were asked to comment on a proposed policy to control oil spills. Since the average cost of an oil spill has been computed as $X, the proposed policy would require any firm responsible for a spill immediately to pay the government $X. Is this likely to result in the efficient amount of precaution against oil spills? Why or why not?
