Peck – Fall of 2014
I) Economics and Natural Resources
• The Five P’s of Environmental Regulation
– Penalties (tax, fine, liability…)
– Prescription (regulations…)
– Payments (Subsidies…)
– Property Rights
– Persuasion (disclosure requirements…)
• Seven Aspects of Perfect Markets
– Many buyers and sellers, all having complete information about the market
– No buyer or seller has enough power to set market prices
– Market participants respond rationally to price signals
– Participants any enter and exit market freely
– All resources are owned and priced with regards to supply and demand
– There are no externalities
– Transacting in the market is costless
• see Collapse excerpt for examples of the two oil fields and how they reflect the Five P’s
• Efficiency and Market Failure: the basic tenet of welfare economics is that resources should be utilized so as to maximize the net benefits for society. Efficiency is economists’ proxy for social welfare. Efficiency is not equivalent to social welfare, however the legal sphere treats them as such.
• “Tragedy of the Commons:” theory of economics in which a lack of ownership leads to individuals exploiting natural resources without consequence because it is of benefit to the individual and the marginal cost is distributed evenly over the other who share the property and the resource
– What is the solution? Privatization
– But, What about things that cannot, by their nature, be privatized, such as air and water? Regulation (e.g. idea of cap-and-trade credits; also environmental contracting, the idea of government agreeing not to raise standards if company lowers emissions)
• How can we value natural resources that are inherently difficult to value?
– Contingent Valuation: estimation based on what people would pay
– Travel Cost Valuation: what do people pay for things; measured by resources that are used commonly by people (e.g. National Parks)
– Hedonic Pricing: Based on actual markets related to a r
e of statehood.
à “Equal Footing Doctrine:” all states enter the union on equal footing as those that were originally colonies. Thus, states hold title to submerged lands of navigable waters upon attainment of statehood.
Illinois Central RR Co. v. Illinois: The Court sought to interpret the Public trust Doctrine. Illinois state legislature attempted to convey title to submerged lands along the Chicago waterfront to the railroad. The legislature later tried to revoke the grant.
à The state holds title to submerged lands under navigable waters in trust for the benefit of the state’s citizens and may not convey it to a private party or attempt complete cessation of ownership.
à The state may convey right to private parties (e.g. wharves, piers, …) so long as those rights do not interfere with the publics enjoyment, or promote the