Introduction

Interweaving core concepts facilitates a comprehensive understanding of environmental

economics. Investigating relevant scholarly articles generates discussion surrounding the field’s

fundamental principles. The paper illustrates the degree to which three articles on Analytical

Tools: 1) Benefits and Costs, 2) Markets and Social Efficiency, and 3) The Economics of

Environmental Quality support fundamental concepts examined in “Environmental Economics:

An Introduction” (Field and Field 2015, chap. 3, 4, and 5). Through applying benefit-cost and

marginal analysis frameworks, students formulate effective policy recommendations.

Article Reviews

Benefits and Costs

In the first study, “Supply Response, Marginal Cost, and Soil Erosion Implications of

Stover- based Biofuels,” the authors examined the benefits and costs of land changes impacting

stover supply density and price. Cellulosic biofuel has potential to be the next advancement in

biofuel production. However, the biofuel is made from corn stover which causes serious soil

erosion without using cover crops. The pricing strategy for selling the cellulosic biofuel is based

on the supply curves predicted by data collected over several years. A market for stover may

result in lower soil erosion insofar as the agricultural producers and manufacturers relocate

land for continuous corn residue removal (Sesmero et al. 2015). The farmland would be

relocated to acreage that would later be surrounded by a manufacturing plant for biofuel.

Doing so would significantly reduce transportation costs which would then increase the price

and supply of the product. The plants producing stover need to determine the marginal cost to

continuously procure stover as the price determines cellulosic biofuel’s viability in the current

energy market.

The authors concluded implementing cover crops nourishes the soil. Stover with 75%

cover crops has lower soil erosion within a given acre (Sesmero et al. 2015). However, the

supply curve changed significantly with cover crops involved because it costs more to produce

stover with cover crops. That being said, the question brings willingness to pay for soil health

into consideration. The values of both healthy soil and clear air are difficult to quantify. The

decision to prolong soil erosion by refusing technological change is similar to saying “I [don’t]

like clean air more than you do” (Field and Field 2015). A firm’s value of healthy soil is

contingent upon how much it is able to increase the cost of its methods. The reduction of

erosion to an area does develop a better crop yield over time, thus benefiting the quantity of

output (Sesmero et al. 2015). Further, consumers may be willing to pay more for the product as

long as they are aware of the effect corn stover production has on soil health. However, current

wealth is a valuable contributor to a firm’s willingness to pay for technological change (Field

and Field 2015). In the case of cellulosic biofuel, a new technology may not have hefty initial

capital to support it launching off the ground.

In addition, cover crops only reduce soil erosion insofar as they are accompanied by a

lower stover removal rate (Sesmero et al. 2015). Specifically, lower stover removal rates would

drive up the cost per ton while higher removal rates would drive down price per ton. A price of

$35 per ton or higher can lead to the manufacturing plants increasing their price (Sesmero et al.

2015). As the supply curve increases, the price of each unit increases insofar as the

manufacturing plants continuously produce cover crops. However, the inclusion of cover crops

would also increase the acceptable rate of stover removal due to the added protection of the

soil (Sesmero et al. 2015). Further, a company’s reduced soil erosion provides savings on costs

of care during the corn growing. The authors successfully support the fundamental concepts as

the article reveals benefits and costs of using cover crops during cellulosic biofuel production.

Markets and Social Efficiency

In the second study, “Pesticides, External Costs and Policy Options for Thai Agriculture,”

the authors investigate the relationship between the market system, its externalities, and social

efficiency related to pesticide use in growing food. Specifically, Thailand experienced a

significant increase in pesticide use from 1987-2010 (Praneetvatakul et al. 2013). The authors

introduced Pesticide Environmental Accounting (PEA) as a comprehensive tool to understand

pesticide use and its wide range of negative effects on bee colonies, biodiversity loss, human

health, and pollution (Praneetvatakul et al. 2013). While the authors depicted the detrimental

health impacts of pesticide use, they also recognized other forces propelling its market.

Organic farmers who are willing to pay for alternatives to pesticides have trouble

engaging in competition. Currently, the organic farmers who are willing to pay for a healthy,

valuable product are supplying less compared to large agricultural firms who use pesticides.

Since the consumer’s price for the organic good is relatively high, the consumer demand is low.

The article generated curiosity regarding how wealth distribution amongst the citizens of

Thailand contributes to their ability to purchase from organic farmers within their country. It

supported a stellar discussion about how public vs. private goods are defined on a spectrum of

relativity to each other. While essentials such as water and air are public goods, clearly organic

food is a private good because it is not “a good that, if made available to one person,

automatically becomes available to others” but non-organic food is not a public good because it

is not free (Field and Field 2015). However, non-organic food is more of a public good compared

to organic produce. Moreover, the article showed overexploitation or underuse of public goods

are correlated to natural resource management problems (Libecap 2019). Equity for a single

group is not a sufficient indicator of social efficiency because there are externalities, or

downstream costs, that people outside a selected group have to deal with. In the article, the

authors explored socially efficient strategies to decrease pesticide use.

The authors emphasized educators need to draw intersection between the social value

of food safety and a firm’s willingness to pay by merging social efficiency with equity. Part of

the reason Thailand’s farmers increased its use of pesticides is because policy decisions

promoted the chemical concoction as a public health and safety benefit (Praneetvatakul et al.

2013). From there, the authors recommended teaching farmers about the negative health

consequence of using pesticides. Further, the authors acknowledged incentives structures are

needed to supplement education initiatives (Praneetvatakul et al. 2013). Moreover, they

informed strengths and short-comings of various government intervention methods for

decreasing pesticide use. The class discussed potential solutions such as command and control,

incentives-based techniques as well as reinforcement of ideas through education.

The article revealed successfully lowering pesticide use involves multiple strategies

collaborating to change the market-based system. Each method contains strengths and

limitations. For example, without command and control and incentives complimenting

education, businesses ignore information and follow improper and unhealthy management

techniques. For example, coal production causes black lung, and while there are federal

guidelines created to protect workers, the cases of black lung are still on the rise (Blackley et al.

2018). Moreover, despite education, ties to certain crops impact Thailand’s consumer habits

(Kazuo 2017). Due to other Thailand conditions, such as finances and culture, government-

funded incentives may be difficult to implement (Kazuo 2017). Further, the current command

and control policy in Thailand is the Hazardous Substance Act which aims to reduce chemical

exposure but has holes in monitoring after point of sale (Panuwet et al. 2012). Therefore, as we

examine market systems, it is evident all three mechanisms need to function well together to

achieve maximum social efficiency. The article supports students understanding the difference

between equity and efficiency as well as how externalities impact a market-based system.

The Economics of Environmental Quality

In the third study, “Marginal Damage Cost of Nutrient Enrichment: The Case of the Baltic

Sea,” the authors determine marginal damage costs and marginal abatement costs of pollution

in the Baltic Sea as it pertains to the Eastern Baltic cod fisheries. The spawning season for the

Eastern Baltic cod extends from March to October with the peak spawn in early summer.

Nitrogen concentrations during these peak months are key indicators of eutrophication

effecting fish stocks (Nguyen et al. 2015). The report details calculations that contribute to the

actual marginal damage costs of cod stocks. The total variable cost of the cod is a function of

harvest rates and spawning fish stocks. The aggregate abatement cost is between $210 million

Denmark Krones and $1.6 billion Denmark Krones. Comparing the aggregate abatement cost to

the marginal pollution damage function determines the loss to fisheries compared to the

marginal abatement cost associated with agriculture. The results show, even though pollution

has caused a decline in the health of the marine ecosystem, the benefits-to-damages trade-off

needs to be analyzed to make an informed decision. The agricultural improvements gained

through increased nitrogen pollution were found to be much higher than the economic loss

from the fisheries.

The information provided in this study provides an excellent real-world model of

marginal pollution damage functions and marginal abatement cost functions. The validity was

established by providing examples of information that was excluded that could further weigh

on the marginal damage costs. It was established early in the study that the cod fisheries were

solely being analyzed as an example for what effect nutrient enrichment through nitrogen

loading has on the Baltic Sea fisheries. The authors established, although the nitrogen levels

need to be reduced to reach the socially equivalent levels, the benefits of nitrogen pollution

through agriculture are high compared to the relatively low damages to the fisheries. The

authors close their study by providing suggestions for further research to more accurately

predict the relationships between pollution and total damages.

Conclusion

We assessed all three articles as valid applications of the concepts with limitations. The

first article review illustrates how the equimarginal principle brings technological change

supporting efficiency in biofuel production due to a supply response and decrease in marginal

cost. However, the article does not consider an environmental impact report would also need

to be updated to include potential effects of machinery pollution and fertilizer runoff. The

second article review shows the difference between equity and social efficiency as we explore

external costs arising from unwillingness to pay for farming methods alternative to pesticide

use. However, the article did not depict how Thai citizens’ value of organic farming versus

conventional farming could be assessed using aggregate marginal willingness to pay curves and

firm-based demand curves. The third article review uses the marginal damage function to

understand pollution in the Baltic Sea as it pertains to the cod fisheries. However, it is difficult

to put a value on loss of marine life other than monetary value on annual fish harvests. The

study does not go in to detail regarding how many sources of pollution there are and to what

scale each source is contributing. Moreover, the study does not account for additional issues

such as salmon or herring fisheries, tourism, and water quality. The Baltic Sea is a large

ecological and economic system that needs to be reviewed through the analysis of many

studies to find the connections. That beings said, all three articles sparked interest to dive

deeper into referenced topics and consider potential policy change resulting from the research.

References

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