Environment and Risk: The Problem of Risk Assessment
Nature always presented risks to mankind and to all life Living beings have adapted to those by
developing survival strategies These are not conscious but have been acquired
in an evolutionary way Human beings have done the same over the ages
except that conscious strategies have replaced unconscious ones
What is new is that humans can modify significantly and quickly their environment
This is not new
Focus on Society-Environment Interactions What behavioral and institutional factors
mediate relations with natural system? What features create vulnerability or
resistance to certain natural events or processes?
What mechanisms are available to different types of society to adapt or mitigate change.
Environment-Society Issues
Level of resource use
Population size Even with constant level of use, attain limits
as population increases Could these be related?
Environment-society issues What behavioral and institutional factors
mediate relations with natural system? What features create vulnerability or
resistance to certain natural events or processes?
What mechanisms are available to different types of society to adapt or mitigate change?
Environment and Society. A Critical Issue for our Future? At issue is relation between natural
processes and human populations To what extent does human agency matter? If human choices affect natural processes,
can we identify some problems crucial enough to address now?
How can cooperation about environmental issues be organized?
General Issue: Environmental Influences and Human Control Immediate environmental influences high in past:
very high risks for humans, examples of collapse
Less important with technological progress: cushioning and spreading of risks
Some troubling aspects remain: mastering Climate change
The Assessment of Environmental Risks
The studies of society collapse show the importance of knowing the environment in order to assess the risks it presents: knowledge of two aspects are important: 1) The evolutionary dynamics of the crucial resource 2) The initial resource stock (ex. climate change)
It also shows the importance of social responses to the problems involved in terms of a) control of access b) charging for use in proportion
3 Types of risk management have therefore to be considered:
Risk management types 1. Risks due to nature 2. Risks due to the consequences of
uncoordinated and non-cooperative human activities, present and future
3. Risks due to problems of coordination and cooperation of social institutions present and future
Risks due to nature can be assessed in terms of expected utility 2 elements: uncertainty measure p (probability) of
an outcome and its subjective value or utility U: P(o)U(o)
This formulation suggests a cost benefit analysis. Suppose there are only 2 outcomes, o1 and o2: Total value is:
P(o1) U(o1) + (1 –P) U(o2) Present value: [P(o1) U(o1) + (1 –P) U(o2)]/r
where r is a discount rate (interest rate)
Risk analysis Suppose we have several other outcomes
resulting from different plans of action
Possibilities
Actions Do Nothing Build small levee
Build big dike
Minor flooding: P
U1 U3 U5
High flooding: 1-P
U2 U4 U6
Risk analysisStates of Nature a1 a2 a3
r1
Extreme bad weather
7000 4000 2000
r2
Nice weather
1000 4000 5000
Risk analysis continuedState of nature r p (r )
r1
Extreme bad weather
0.40
r2
Nice weather
0.60
Solution of the minimization of expected losses: Min L(a) =Min (aij p + aij (1 –p))
Expected losses of a1 are inferior to all others: 3400 instead of 4000 and 3800
This conclusion holds only if one cannot update informations
Cost Benefit Analysis Previously take the PiUj which is largest
(or smallest if the U’s represent costs) Climate change: Choose where Marginal
Damage of CC = Marginal Cost of Abatement
Risks from Nature, Risks from Society
As seen from the Stephens text in Cashdan, risk analysis can help us understand animal behavior and thus raise our knowledge about nature This is necessary for estimating stocks of
natural resources and their evolution Risks from Society involve the positive or
negative influences (externalities) people can exert on each other
Complexity of Human Behavior
Human behavior is obviously complex. One can analyze it with the help of general concept such as the one of collective good. A collective good characterized by two aspects: Non excludability and some times non-rivalry. Collective goods that are rival, so called commons, thus 2 types of collective goods: welfare generating and welfare preserving
Welfare preserving collective goods In welfare preserving (rival) collective goods,
users represent a negative externality with respect to each other. The risk comes from others! The purpose of institutions is to limit use. This is difficult to achieve because there is a first mover advantage of non cooperation with the institution which then often leads to conflict and coercion
This model cannot easily be followed at the inter-institutional level
Welfare Preserving Collective Goods: Dasgupta and Heal Economic Theory and Exhaustible
Resources (1979) Graciela Chichilnisky’s Trade Theory between Regions
with Different Property rights Regimes (1994) The choice is not really only between different types of
rights but between different types of hierarchies of collective goods: Even private property rights have to be protected!
Problem: 2 strategies•Adhere or not to a strategy depending on what others are doing.
•This problem can have a stable (Nash ) equilibrium
•The equilibrium is only efficient if a sufficient number participate.
•Non- Efficient Accord Efficient Accord
Coop. Strat a(t)
Non Coop. Strat b(t)
Stable Nash Equ.
Min fraction of total to sustain accord
0 t 1
Stable Nash Equ.
Min fraction of total to sustain accord
Non Coop. Strat b(t)
Coop. Strat a(t)
0 t 1
U(t)U(t)
Theory of Collective Goods and Theory of the Open Access The importance of jointness: Behavior
driven by average product: F(Nx)/N(x) Open access as opposed to private
marginal product dF(Nx)/dN(x) As emphasized by Dasgupta and Heal open
access problems are not PD problems
Open access resource use Open access situations are characterized by
an overuse of Resources at any price. This is due to the fact that one can show that the open access marginal product is always superior to the “restricted access” marginal product
Open access and “private” supply
Graphical Illustration
Role of a Market for Externalities
Mechanisms developed by society To set limits on resource use before
diminishing returns set in To meet needs across space and
through time with greatest efficiency
Market for externalities solution
Conclusion There are several ways of solving the open
access question Markets for externalities, the most efficient
solution might not always be possible The structuring of authority associated with
the open access problem is quite important
Property rights
Role of Property Rights
Mechanisms developed by society To set limits on resource use before
diminishing returns set in To meet needs across space and
through time with greatest efficiency
Property Rights solutions
Standard economic view of property rights Well-defined property rights Market mechanisms and a pricing system No transaction costs No income effects
Assumes collective action problems solved
Private property solves production (and environmental) problems Can anticipate diminishing returns:
incorporate foregone benefits into present production decisions (Hotelling)
Private property rules provide means to maintain efficiency even when environmental externalities exist (Coase)
Possible problems
Definition of the property itself
Enforceability of exclusionary rights
Optimality
Common Property: Tragedy of the Commons
Resource that is:
Depletable Non-exclusive Rival Joint, fugitive
Common Property
Resource unit defined Well-delineated user group Multiple users Explicit rules of extraction
Why Common Property?
Nature of resource
Economies of scale
Maintenance or capital demands
Enforcement
The Example of water Common good aspects Competitive use Particular spatial distribution creates
asymmetries Upstream-downstream Common pool: technology differences lead
to differential access Unequal political power
International aspects compound problems
Debates about water
Debate over nature of resource Symbolic aspects: natural right Water as economic good
Debate about most effective management strategies
Symbolic aspects: natural right Open access?
BUT Demographic growth
Urbanization: concentration of demand Agricultural intensification
70% of water used for irrigation
Changing demands: economic development Quality/quantity
Health issues: water borne diseases Pollution: overuse and salinization
Nature of resource debate
Nature of resource debate
Water as commodity: evaluate costs Supply costs: exploitation, maintenance,
investments Opportunity costs Externalities Goal: promote efficiency and avoid "tragedy
of commons" type outcome
Management problems
How to balance equity issues raised by "right to water" approach with efficiency aspects raised by "water as commodity" view?
Aral Sea 1985
A view of the problem
Aral Sea 1997
Causes of shrinking Aral Sea
Since 19e century, Russia, and later Soviet Union emphasized cash crops: cotton and rice Reduce dependence on imports Acquire hard currency
After 1960, consequence of policy was reduction in volume of water flowing to Aral Sea
Soviet system
Quotas specifying quantities of water available for each region
Exchange fossil fuels and energy for water Coordination by central government
Present context
Water allocation is no longer an domestic issue within a centralized state but has become an international problem New source of conflict
Current management structure
Almaty Agreement 1992 Based on former Soviet allocation system Creation of interstate commission where
decisions taken by consensus Establish quotas Assure their implementation
Management problems
Maintenance of old Soviet system Not all states accept previous allocation
criteria Favors richer downstream countries
Enforcement problems: quotas not respected
Exchanges between energy and water have been maintained but also not always respected
Persisting common good problems
Lack of information on quantities really available Thus cannot determine sustainable rate of use
Costs of water use not distributed fairly Downstream users of Toktogul dam do not
contribute to maintenance costs
Reaction
After independence , Uzbekistan and Kazakstan introduced market prices for gas and coal.
Kyrgyzstan couldn't pay: increased electricity production to increase revenues but then the amount of water available for downstream irrigation in Uzbekistan and Kazakstan was also reduced
Response
2001: Kyrgyzstan passed law to regulate transborder water use: Water belongs to state Has economic value Kyrgyzstan owns water "created" within it
borders Users must pay
Water: International efforts
Dublin Conference and Rio Summit, 1992 Broad often contradictory principles
Slow definition of international water law: UN Convention 1997 on non-navigational uses
Relevance of different property regimes to other current environmental issues Confrontation of regimes is occurring
South/North Common property characteristics of
environmental resources Institutional solutions are adopting
common property arrangements
Problems of environmental regulation; solution through definition of property rights
Atmosphere rival at global level Consumption interdependent Command and control difficult to achieve
because deal with countries Introduce market solution to create incentives Raises problems of initial allocation
Efficiency, the Environment and Property Rights What is efficiency in economic, social,
environmental, and technical terms? Are they equivalent? What is the relation with property rights? Is the problem simple to solve?
Efficiency Economic and social efficiency: use
resources in such a way that they minimize costs and maximize profits
Technical efficiency: minimizing inputs with respect to outputs minimizing energy use
There should not be any contradiction between the 2 above
If contradiction: not internalized externality, ill defined property rights
The Coasian analysis Problem of property rights, efficiency and
externalities raised by Coase Argument: What matters is the overall cost and
benefit Compensation schemes can be built around this
principle It depends who has the biggest loss The issue can be resolved by negotiation All allocations based on Coasian principle
optimal
What do property rights provide? Demsetz claims that they are an
internalization of externalities Adjustment of property rights are an
adjustment to externalities Example: forced labor Property rights originate under scarcities in
particular environmental scarcities
Problems raised by Dasgupta and Heal Property rights are not created in a vacuum Problem often comes from partially
defined property rights Coase and Demsetz assume symmetry
which might not exist They implicitly assume unique equilibrium Problem: Multiple equilibria
Multiple equilibria
Solutions In these cases, solutions have to be
revealed to producers Sometimes solutions have to be imposed
Sustainability and exhaustible resources In some basic sense nothing is truly sustainable
since finite resources are continuously exhausted by man but also by nature
Sustainability has thus evolved to mean a “correct” relationship between generations
Dasgupta has suggested that net wealth rather than income should be considered in this relation
Net wealth is accumulated social, economic and institutional capital minus depreciation for natural resources exhausted
Sustainability continued Sustainability means that resources should be as much
as possible preserved for future generation’s use The net wealth criteria tells us that some countries like
India have GDP growth but decreasing net wealth while Western countries have increasing net wealth and income Africa, decreasing net wealth and income
Clearly this means that slowly renewable and exhaustible resources should be depleted at an optimal rate.
Theory of slowly renewable resources Slowly renewable resources have to be
evaluated as an evolving stock such as a population minus withdrawals
( ) ( ) ( , )1dz
d tH z F z N x
Evolution of z = Natural Dynamics of z minus catches
Slowly renewable resources: Production Producers will be drawn into using the
stock by profits:
( )( , )
2dx
d t
qF z N x pN x
N
Evolution of inputs x, if average profits are positive, if F is production, q unit price, p unit costs
Equilibrium conditions In equilibrium there should be an optimal
level of the resource z if:
( )( , )
ex p30
qF z N x pN x
Nrt d t
Is maximized subject to the relation before and where r is a discount rate: The discounted sum of all future profits is maximized with a discount rate r, the spot price of the resource is thus dependent on availability of z in nature and the discount rate
Exhaustible Resources Hotelling Principle: An exhaustible resource is an asset and its net
price (market price - extraction costs) should increase exponentially with the interest (or discount rate, to some extent a socio-political construct), i.e.:P(t) = P(0)eit or (dP/dt)/P = I
Indeed if for the resource Z, the price is P.Total value of resource:PZ. Compare to other assets, P has to grow as P(0)eit to stay competitive.
Hotelling’s Principle: Competitive resource owners will
deplete at a socially optimal rate Take r the rate if return to the
owner of natural resources. In equilibrium : r = i
Whenever, r … i, we have a conservationists dilemma.
Conditions for Hotelling principle 1. No externalities 2. No uncertainty about future sales,
exploration prospects, etc. 3. No extraction with environmental
externalities (ex. Gold Rush). 4. Not too big differences between
private and market (social) discount rate (for instance due to dangers of transfer within society)
Example:Deforestation processes According to Hotelling principles a forested area
is a particular type of asset whose capitalized value should grow with the interest rate. If this growth is not achieved other assets including agricultural ones will be closer and the forested land will either sold for development or transformed into another agricultural asset.
In particular:If the income flow stemming from the forest is lower than the income flow from other activities then deforestation will occur!
This can be due to: subsidies for agricultural production income subsidies or welfare cost of property rights enforcement prohibition of trade unclearly defined property rights
Graphical analysis
Population Dynamics
Fundamental problem of global environmental change:
Balance supply of resources from physical system with demand for these resources from human populations over time
Population dynamics
Fertility Mortality Migration Population size Age distribution
Measuring Population Static: characteristics
Total Age distribution Genders Urban/rural Geographic distributions
Dynamic: use various extrapolation techniques to predict future trends
Measuring Population Challenges in achieving accurate
assessment Completeness and accuracy Census comparability Different interpretations of categories Different areas/levels of aggregation Different time periods Size of area Units
Projections Dependent on accuracy of initial conditions
(i.e. count) Need techniques of projection
Postulate relationships among the different aspects of population so you can have internally driven system.
But projections assume smooth path. Also need to introduce mechanisms to account for changes in rates
Malthusian theories of population Assumptions
Constant "passion between the sexes" Finite earth
Argument: Left unchecked, population grows and, by
definition, grows exponentially (passion) After an initial period of strong growth,
output as a function of population (labor) exhibits diminishing returns
Preventive checks Late marriage
Celibacy
Low marital fertility (spacing)
Contraception
Migration
Positive check: Mortality
Alternatives to Malthus: Boserup/Simon
Relate technological progress to population growth
Population concentration leads to higher likelihood of technological advance. Population growth longer hours, More labor-intensive techniques eventually
leads to more sophisticated technology.
Multiple influences on population dynamics
Demographic influences on fertility
Institutional controls Property rights Production systems and technologies
Pre-industrial Western European Demographic Regime
High mortality High Fertility
Fertility ControlsCelibacyAge at marriageSpacing behaviorContraception
Limits to Malthusian Approach Explaining emergence of new demographic
regimes How technology might explain shifts
These considerations important, because new regimes have emerged
Synthesis argument: Lee, Ronald, Malthus and Boserup: A Dynamic Synthesis, In David Coleman and Roger Schofield, The State of Population Theory, Oxford: Basil Blackwell, 1986.
Demographic Transition
Characterized by a drop in marital fertility Achieved through "stopping" behavior, i.e.
controlling births after having the desired number of children
Demographic transition
Puzzle Not linked to decreased mortality No obvious link to Industrialization No Malthusian population response to
income growth
Fertility Declines, Real and Projected
1
2
3
4
5
6
7
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Chi
ldre
n pe
r Wom
an
(2.1
= n
o po
pula
tion
grow
th)
Developing
Developed
Africa
Asia
South and CentralAmerica
Stabilization Remains a Challenge
0
1
2
3
4
1950 2000 2050
Stab
iliza
tion
Ratio
(birt
hs/d
eath
s) (1
= n
o po
pula
tion
grow
th)
Developing Developed Africa Asia South and Central America
Sub-Saharan African Fertility Regime Low age at marriage Polygyny: men have many wives, leaving few
women celibate Acceptance of pre-marital and extra-marital
sexual relations Remarriage after widowhood or divorce is the
norm
These are all factors that make women susceptible to childbearing throughout their reproductive period of 15-49.
Differences Pre-industrial European and African Regimes
Europe: reduce "exposure"
Africa: spacing behavior
Characteristics of Sub-Saharan African Social System Poorly defined or poorly enforced common property
systems Children reared communally (polygyny)
Share “costs” in time or responsibility Weak conjugal bonds Lineage holds land
Large families have access to larger share
References: Dasgupta; Partha, The Population Problem: Theory and Evidence Journal of Economic Literature, 33, 4, 1995: 1879-1902; Chichilnisky, Graciela, North-South Trade and the Global Environment, The American Economic Review 84 (4): 851-874.
Changes in life expectancy in selected African countries with high and low HIV prevalence: 1950 - 2005
with high HIV prevalence:
Zimbabwe
South Africa
Botswana
with low HIV prevalence:
Madagascar
Senegal
Mali
Source: UN Department of Economic and Social Affairs (2001) World Population Prospects, the 2000 Revision.
30
35
40
45
50
55
60
65
Lif
e e
xp
ecta
ncy
(y
ears
)
1950– 1955
1955- 1960
1960-1965
1965-1970
1970-1975
1975-1980
1980-1985
1985-1990
1990-1995
1995-2000
2000-2005
0 10 20 30 40 50 60 70
Cambodia
Haiti
Mozambique
Rwanda
Côte d'Ivoire
Zambia
Kenya
South Africa
Zimbabwe
Botswana
Life expectancy at birth (years)
Predicted life expectancy Loss in life expectancy due to HIV/AIDS
Source: U.S. Census Bureau, 2000
Predicted loss in life expectancy due to HIV/AIDS in children born in 2000
Population and environment: Key points Population dynamics in part create
“demand” for environmental resources by determining population sizes and distributions Other factors: tastes/lifestyles; technology
Importance of understanding mechanisms linking fertility—mortality—migration and relation between these demographic processes and other socio-economic variables
Two views of population—resource interaction
Population grows until limited by resource availability (at all levels of technological development). Ultimately checked by mortality: Malthus
Population growth stimulates technological development which permits higher levels of population: Boserup/Simon
Problem: How to account for new regimes?
Malthus perspective could not account for shift from high fertility—high mortality to low fertility—low mortality first in Europe then, progressively, globally
Demographic transition: the definition “Pre-transition” Western Europe
characterized by high fertility and high mortality
“Transition” defined as a drop in marital fertility that in Western Europe was achieved by “stopping” behavior Conscious limitation of family size once a
desired number of children born
Demographic transition: the evidence
Shift from high to low fertility was a result of deliberate family limitation
Transition occurred rapidly once it began To date, process has been irreversible
Causes: Early theories Link to modernization: Frank Notestein
(1944) “New ideal of the small family arose in the
urban industrial society. It is impossible to be precise about the
various causal factors, but apparently many were important” Individuality Mobility Education Declining mortality Costs of children
The standard model
Transition: the European-US data
Great variation in socio-economic and demographic conditions Timing and extent of decline in mortality
France and USA Infant mortality varied Extent of urbanization differed at transition
France 1800: 70% male labor force in agriculture England 1892: 15% male labor force in
agriculture
Transition: Developing countries
Link to mortality seems more direct Knowledge and treatments not available at
time of initial transition in Europe and often precedes fertility decline Role AIDS epidemic as Malthusian control in high
fertility regions
Sub-Saharan Africa either slow to adopt transition or exhibits special characteristics
Questions for future Evolution of African population patterns Response of regions where population
below replacement rate Lower population levels Pro-natalist policies Role of migration in redistributing population
Prediction difficult since mechanisms of previous transitions are still under debate
Environment and Migration Migration constitutes, as mentioned before,
a significant factor in population dynamics Migration and the environment are linked
in 2 important ways: Some migrations are environmentally
induced: ex. The dust bowls in the US, the Sahel
Migrations create environmental problems: crowding effects
There are two basic theoretical considerations about migration which emphasize either push or pull factors Voluntary migration: migrants decide to move from
one place to the other on the basis of some incentives, wages, quality of life
Involuntary migrations: migrants are excluded from a given society and are forced to leave
This 2 causes can combine themselves
Before we look at these links let’s consider theoretical approaches to
migration
Involuntary migration A description of the multiple aspects of
involuntary migration is included in the Zollberg article: political, racial or religious reasons
The collective good literature helps to understand exclusion processes
Other countries often are reluctant to accept these populations which are then concentrated in relatively small areas and cause environmental problems
Voluntary Migrations Since voluntary migrations are based on
incentives to move, these incentives have to be made explicit in the form of wage differentials for instance
Migration due to wage differential constitutes the main explanation for migrations in economics
A standing puzzle lies in the explanation of overcrowding of big developing country cities
Harris Todaro Model These 2 authors postulate a 2 sector rural
(agricultural) and industrial economy Wages in agriculture are: WA=P.q’ Wages in industry are dependent upon a minimal
wage Wmin They are:
1,min
U
M
U
MU N
N
N
NWW
Equilibrium conditions As long as the following is >0, migration will occur
0','min
Pq
N
NWN
U
MU
N Is a time evolution (derivative)
Other Factors Could Be Important As well The pull aspect of cities exists before
Minimal wage policies are applied The pull aspect is enhanced by existing
social networks that support newcomers Increasing returns to scale in cities High paying but difficult to enter jobs Segmented labor market
Increasing Returns
Other incentive models: The Owen land use model The land use model developed by Owen assumes
only two types of land use, agriculture and dwelling and examines the special case of areas around urban centers
Whether land will be transformed into dwelling will depend on income streams generated by both
Arrival of newcomers increases income streams from dwellings especially if migrants get subsidies
Conclusions of Owen model and further development Even under normal conditions, as long as there is
an attraction to moving into an urban area such as a subsidy or the hope of a job, farm land will be urbanized down to a critical value which can be very close to zero.
Higher interest rate for agricultural investments as opposed to investments for urban dwellings will accelerate the process.
Further conclusions Mass migration which can result from climate
change will accelerate this process.
Foreign aid and relief can accelerate the process An Ill-defined property right regime will initially
slow but then accelerate the process.
Climate change might reduce net profits made from agricultural production and accelerate the process.
Trade and Environment From a general point of view, trade and the
environment should be neutral with respect to each other
Problems come from the different political social and legal structures between countries
These lead to either advantageous or problematic relationships between the two
Positive and negative effects Environmental conditions can be positively affected by
trade liberalization Positive effects can result from the suppression of
distortions which have all kinds of costs including environmental ones
Other legislation than trade legislation might create distortions: environmental standards
A market economy and this is due for trade as well can work optimally only if some structural conditions are similar such as property rights
To make all this explicit lets look at trade theories
Property Rights, the Environment and Trade Changes in the Economic Theory of Trade Traditional Theory Based on the Notion of
Comparative Advantage: Heckscher Olin 2 New Notions:
Importance of Increasing Returns to Scale and Intra-Industry Trade (Helpman, Krugman, Ethier, etc.)
Importance of availability of a factor and factor prices (Chichilnisky)
Characteristics of Trade Importance of increasing returns in
External aspects Monopolistic competition
Some property rights regime lower the price of factor inputs Countries with ill-defined property rights extract too
many natural resources They have thus an "artificial" comparative advantage
in environmental goods
The Chichilnisky Perspective
Chichilnisky (1994) has analyzed trade links between regions with different property rights
Basic conclusions are drawn from her investigation:
The region with undefined property rights will supply more of a resource at any price
This applies to any good that is "fugitive" : rights of ownership established only when captured or freely extractable
Open access and “private” supply
Chichilnisky Perspective This situation creates an "abundance" of the resource in
the region without or with ill-defined property rights The region will "appear" to have a comparative
advantage in the given resource. Abundance is not due to any intrinsic natural
availability of the resource but only to the absence of rights.
The region without property rights will get poorer because it will get rid of its resources at too low a price.
Chichilnisky: Analysis Assumptions about the region without well defined
property rights: elasticity of substitution between leisure and
consumption for harvesters or extractors of the resource good that is lower than 1
extractors consume mostly other goods than the natural resource that are purchased with their harvest or catch
An increase of the relative price of other goods with respect to the resource will result in more extraction
Consequences
Regions with ill-defined property rights are "exploited" those with well defined rights. Resultant lower prices lead to increasingly unfavorable terms
of trade followed by more extraction of the resource
Thus regions with poorly defined property rights grow poorer as a result of trade with regions with better defined property rights
More important, corrective taxes are counterproductive: lower demand and lower prices lead to more extraction
Analysis of Countries with Ill-Defined Property Rights These countries are sensitive to price fluctuations due
to substitution effects or taxation policies Lower prices lead to more extraction of natural
resources due to a lowering of the opportunity cost of labor
This lowers their bargaining power at the international level
Their bargaining power is lowered further by the cost of the artificial "comparative advantage" in terms of natural resources on the society as a whole which might lead to social upheavals.
Environment and trade policies One has to distinguish here between
production and consumption The prevalent norm and WTO rule is that
consumption can be regulated with respect to environmental standards (up to a point) by national legislation
No such leeway exists for production methods (ppm problem)
Conflict, cooperation, and the environment
The relations between conflict, cooperation and the environment are numerous but cannot always be clearly established
Quite clearly early cooperative structures such as early agricultural states were driven by the necessity to better control the human environment
Resource driven conflicts are probable in this context
Relationships between the environment and human production As technology evolves, the relations between the
environment and human activities become more distant
2 types of relations can be emphasized: 1. Cataclysmic Events such as volcano eruptions
Long term changes such as deforestation trends and climate changes: the 2 may be linked
Conflicts over environmental resources may exist but they are difficult to show
Difficulty to disentangle environmental form other conflicts, ex. Rwanda
Here again importance of property and property rights
Similar for conflict over resources: Central Asia and Water in the Jordan river water basin, conflict between Turkey, Syria and Iraq over the Euphrates and Tigris waters
The Central Asian Water Question
Symmetric and Asymmetric
Access to Resources:
The Example of the Middle East
2 Middle Eastern Conflicts: The Jordan and Euphrates River Basins Jordan River: Israel plus Palestinians use about
2300 million cubic meters per annum, only 1950 is considered sustainable
Jordan uses 740 to 750 million cubic meters per annum. Only 730 is considered sustainable
Euphrates: Turkey reduces Euphrates flow to 500 to 300 cubic meters per second, 700 are demanded by Syria
Some Theoretical Notions Goal: tackle problems analytically and suggest responses that
tend to promote strategies to minimize conflicts and promote cooperation
All social interactions and conflicts are not the same. They have to be analyzed according to their incentive structures
Water problems are also common problems Commons lead to asymmetries: Lack of dominant strategies lead
to first mover advantage First, (or second) move advantage can be enhanced by
geographic or technological circumstances
Fundamental Questions to Address
What are the nature of the conflicts
How can one find optimal solutions to solve them?
Water competition has technological and economic limits
Price of Water from Sea: fundamental Given by the cost of a m3of water from sea water
or possibly from pipe lines:Around 65¢ per m3
70% of all consumed water is for agriculture (irrigation)
In the Middle East this proportion can reach 80 to 90 %
Is it worth it?
Symbolic aspects The sharper the conflict and the demands
around it, the more is at stake Giving in on little things is perceived as
signal to give in on big ones
How to get out of the conflict spiral? Emphasize limited worth of conflict
Franklin Fisher approach using pricing Problem: Symbolic aspect Policy of mutual voluntary restraint in use Reduce conflict extensions to other areas
through compensations
Difficulty: The Mid-east population explosion
Graph 6 Population Jordan: Observed and Calculated Values
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1970
1971
1971
1972
1973
1974
1974
1975
1976
1977
1977
1978
1979
1980
1980
1981
1982
1983
1983
1984
1985
1986
1986
1987
1988
1989
1989
1990
1991
1992
1992
1993
1994
1995
1995
1996
Years
Po
pu
lati
on
(M
illi
on
s)
Calculated Values Observed Values
The Mid-East Demographic Boom
Per capita GDP diminish in the Mid-East
Row
Column
(3,3) (4,1) (2,2)
C
C C
C
Prisoner’s Dilemma
(1,4) (2,2)
Row
C C
Row
Column(3,3)
(4,2) (1,1)
C C
C C
Chicken
Environmental Negotiations The Common problem makes it difficult to
carry out international environmental negotiations
Often countries try to free ride on each other
It is difficult to exclude from environmental benefits
Unit veto and leader problem
Unit Veto makes agreements even more difficult
Particular importance of players One has to find ways to exclude Side payments have to be provided Importance of a leader, US for Montreal,
EU for Kyoto