Overview and Introduction

    What will the future bring?  Will we be "better off" or "worse off"?  Of course, nobody can answer this question definitively for a number of reasons:
    First, is it even the appropriate question?  (should our concern be merely whether humans are better or worse off?)
    Second, what do we mean by "better off" or "worse off"  (if we have more of every good, including environmental quality, clearly we're better off, but what if we have more of some things and less of others--is it easy to know an improved state has occurred?).  For purposes of this course, we will take the traditional definition of being "better off" that is used in economics: We are better off, if you get a preferred bundle:  If  U(X', E') > U(X", E"), where X'>X" and E'<E" then you are "better off" even though the environment is of lower quality in the preferred state.  Note, however, that this definition is a Pareto efficiency criteria that can only be aggregated to an aggregate welfare function, if everybody agrees (though some may feel more or less strongly about it) that U(X', E') > or equal to U(X", E").  The problems just begin here:
    Environmental preferences are not generally "knowable" because the dollar metric of economics can have different utility value to different people (in particular, the poor are generally viewed as having a greater marginal utility gain from a dollar than the utility loss of a dollar from the rich...note the ambiguity of even this!  GRAPH).
    In addition to this problem, the environmental component of how goods translate into utility is particularly difficult to know...and many feel that the way valuation is treated understates environmental values, though there are some cases where overstatement is theoretically possible.
    Moreover, even if we could know environmental preferences exactly in dollar terms, and even if we felt that the income distribution was "OK," being the product of the political process, we are still not out of the woods!  There is great variation in environmental preferences--EC4545 students value it more than most economics majors but less than most EC3545 environmental studies majors.  Students collectively value it more highly than their parents...ironically, your parents (any of an age to be in school or of a liberal political bent between, say, 1967 and 1973) were almost certainly more environmentally concerned and active than you!  (They changed...we'll discuss that).  But, with variations in preferences for environmental quality, there will almost certainly be many people who are made worse off in the preceding example...because they have high environmental values and low values for ordinary goods.  This is not a problem to the extent that environmental goods are like ordinary goods (e.g. buying land with clean air on it...at least for a while!), but many if not most environmental goods are public goods, that we just "get some amount of" (more on this in class).  That means that even at the apparent social optimum of the economist, about half of the people will want a less-clean but lower cost world, while many will want a much nicer world.  The preferences of these people must inevitably be compared somehow (economists use B&C analysis for this).  BUT, economists know they can't in fact make interpersonal utility comparisons except in dollars!  There are seven clear cases where this makes an important difference,
    1) that you will ONLY hear in this class (a colleague and I are in the process of publishing it) and it remains a problem even it problem two below were not a problem.
    2) is if the $ transfers that could make everyone better off aren't actually transfered!  You are, in fact, weighting the worth of a person's preferences according to how much he or she is willing to spend on it (e.g. if people were willing to pay more for brothels, and access to internet porn sites, than for environmental goods are such things really better for society? the whole world of other species?  what about "within-environmental good trade-offs"? should the backpacker use the forest or the snowmobiler?  who do you think would pay the most?; what if future generations are hurt by our choosing too many ordinary goods and too few environmental goods?  They can't pay, since they aren't even alive yet!).
    3) this is a real kicker, following from the preceding--the necessary transfers are almost never made!  So we end up in a world of Kaldor efficiency; in which we argue that we are better off if we have projects with B > C, because in principle we can make everybody off with such projects (since benefits in dollars exceed costs, a transfer of enough of the benefits can "buy off" the environmentalist).  This might be ok, if the dollar values are accurate, in that it won't matter if there is no systematic bias against any particular group in society.
    BUT, 4) perhaps unfortunately, the vast bulk of the evidence suggests that environmental quality is a superior good!  This, interestingly, has the unfortunate consequence that when we make any transfers to the poor from the rich, the "optimal" environmental quality gets smaller!
    6) many policies that aim at getting environmental preferences use "non-dollar vote" methods.  One of those is voting (e.g. the California Green propositions).  Environmental preferences tend to be skewed for a variety of reasons.  The highest environmental damages are felt by the sickest members of society...all they can do is for "for," even though the consequences might be death, when the healthy majority soundly defeats a measure that has small excesses of costs over benefits to them.  Voting fails to reflect intensity of wants.  The very rich are few in number.  The tax-strapped great middle class, who have pressing problems of paying college tuition, making mortgage payments, etc.don't even want more poverty alleviation for the poor because they are, due to sheer numbers paying most of that already (and recall the "optimal" environmental quality would get smaller with the transfers!).  Voting as a mechanism of discovering environmental preferences is rigging the outcome against the environment, even though some things do amazingly pass such tests!
    7) alternatives to voting with either dollars or votes are vitally needed!  Valuations are only easily in those handy $ (and you'll see that I'm using "easily" very loosely here!) for the so-called "use" or "direct use" environmental goods.  Indirect values for many things are clearly a larger portion of the total value than use values (obviously "swamps," now called wetlands, but the big categories are: option to use, bequest for future use of relatives, preservation use for future use of humanity more broadly, and existence value to the ecosystem).  Thus, the "cutting up for dog food, perfume, scrimshaw, blubber, etc." demands for blue whales are readily measured, but their existence value...the value of having them share the earth with us, as the largest mammel is.....a big guess, and as that, no number is taken very seriously.  If every household in America alone thought it was worth $10 to save something, that's well over a Billion dollars!  That buys a lot of saving!).  "Non-use" or "Indirect use" values are often obtainable by using techniques that have led many economists to conclude that great upward bias exists there.  Such methods are not yet getting accepted with any frequency in major journals of the profession.  They are read with enthusiasm by the "choir," and are mostly ignored by policymakers at this time.  That may change and we will discuss the issues.
    As mentioned, we will be spending a lot of time on the many "smaller" sources of bias against the environment in the dollar valuation issue...but remember that the preceding truly important questions are completely glossed over by acceptance of a B & C criterion (more accurately a Net Present Value, NPV, criterion).  In other words, it is a REALLY HARD PROBLEM to know whether we are getting better off or worse off over time.
    Finally, we can never--in a meaningful way--know what the future will bring for otherwise we don't have to wait for it!  Anybody, whether Doomster or Boomster, who thinks that they know now what the future will bring is very likely to experience a lot of surprise as time unfolds!

"Doomsters" Versus "Boomsters"--views of the future

    Doomsters such as Paul Ehrlich, Club of Rome, Malthus, et al. believe that growing income and population will inexorably lead to greater "throughput" in production, with the direct consequence that a) we either pollute ourselves to death, or b) we run out of resources.  Doomsters generally are pessimistic about the role of technology in bringing about a better future.  Related beliefs involve continued encroachment into wilderness areas, species and habitat destruction, and possibly the more indirect demise for mankind resulting from exceeding the assimilative capacity of ecosystems that sustain us.
    Boomsters such as Julian Simon or Herman Kahn, believe that growing income increases the demand for environmental quality, while growing population provides more minds and labor to solve problems as they arise.  Technology is viewed more favorably by boomsters as an additional mechanism through which we may achieve a better future.
    The population-income-environmental quality relationship is much more complex than most people realize.  As is the case with all problems, environmental problems are typically worse (though different in form, with water pollution being relatively more of a problem than air pollution) in the poorest countries of the world.  The long-run predictions of both doomsters and boomster have been laughingly wrong, particularly the former.
    The "truth" is, of course, somewhere between these extreme positions (Doomsters recognize obvious improvements in levels of environmental quality in certain settings, while Boomsters recognize that mistakes do happen--we have Love Canals, Times Beaches, Bophals, ozone holes, etc.).  It is empirically clear that trends in environmental quality are definitely mixed; there are cases of definite improvement (U.S. air quality would be an example).  There are cases of definite decay (the world's fisheries would be an example, although progress is beginning to be made).  There are cases of uncertainty whether a change is good or bad  or whether there has even been a change.  We will provide some examples of these cases as the course progresses.  The real question of interest (one we'll return to at the end of the semester): Is our future to be characterized as a "one step forward-two steps back" process or is it a "two steps forward-one step back" process?  If the former, the Doomsters will be fundamentally correct, but if the latter, the Boomsters will see their views validated by unfolding events.  How the seven big problems, and the many minor ones to come, get treated by policiemakers who by and large currently fail to recognize their existence!  We've got our work cut out for us.
    There is another point to raise at this time.  The Boomsters have gone to considerable effort to make fun of a wide range of erroneous predictions that have been made by Doomsters over many years--we will talk about a number of these, including the Simon/Ehrlich bet, during the semester.  However, the Doomsters counter that without their dire predictions perhaps the changes that "saved the day" would not have occurred.  They argue that their warnings have been vital in bringing about many of environmental improvements we have seen.  However, others are concerned that many Doomsters have clearly overstated certain dangers (perhaps in the hopes of gaining more donations--Sierra Club, Greenpeace, etc. are, after all, businesses that require funding).   The concern is that after repeated "Chicken Little" or "Crying Wolf" warnings (recall the children's stories), the citizenry may stop listening--just when the impending danger becomes very real.