In a well-known legal case, a classic conflict of property rights was featured. Red cedar trees, used only for ornamental purposes, carried a disease that could destroy apple orchards within a radius of two miles. There was no known way of curing the disease except by destroying the cedar trees or by ensuring that apple orchards were at least two miles away from the cedar trees. Apply the Coase theorem to this situation. Does it make any difference to the outcome whether the cedar tree owners are entitled to retain their trees or the apple growers are entitled to be free of them? Answer.
Coarse theorem is a concept in economics, which explains that efficiency in economic activities is best, attained through the full provision and absolute trading feely in property rights. The concept further explains that the most important thing is that everything is owned by someone. It is also based on two fundamental ideas of freedom of choice and zero operation costs. Actually, according to this theorem, there is no much difference created to the results whether the owners of the cedar trees are entitled to retain their trees or the apple growers are entitled to be free of them.
The reason is because, what is most important is that both properties are owned by someone. Both parties need to have their property rights respected. If there is a situation that the trees are cut, their ornamental value is lost. Moreover, bringing the apple orchards closer to the trees, within a radius of less than two miles would lead to their eventual destruction. In order to ensure there is freedom of choice as well as the operational costs are minimized, a distance of at least two mile should be maintained between the apple orchards and the cedar trees.
This ensures that both property rights hold. Question 2 CH 4 (P. 89) In primitive societies the entitlements to use land were frequently possessory rights rather than ownership rights. Those on the land could use it as they wished, but they could not transfer it to someone else. One could acquire a new plot by simply occupying and using it, leaving the old plot available for someone else. Would this type of entitlement system cause more or less incentive to conserve the land than an ownership entitlement? Why? Would a possessory entitlement system be more efficient in a modern society or primitive society?
Why? The concept of land possession involves being entitled to the use of land, which is freely transferable and does not normally have a specified date for termination of title. Nevertheless, possessors of the land are required to make payments only for the value of the land when it is in unimproved situation. It is different from land ownership whereby an individual is legally recognized as the rightful owner of the land. A possessory form of land use allows land possessors to use the land and later transfer it to someone else on whatever terms agreed upon.
In most cases, little attention is accorded to land conservation measures since people normally focus on overproduction at the expense of the quality of the environment. They focus on making the best use of the land for the time it is entitled to them. In addition, possessory entitlements to land find better application in the primitive societies rather than in the modern one. Sometimes people have been evicted from lands that they have been using for a long period of time thereby causing a lot of confrontations. Therefore, possessory rights to land use cannot be determined legally but is instead determined within a social framework.
Question 3 CH3 (P. 62) Certain environmental laws prohibit EPA from considering the costs of meeting various standards when the levels of standards are set. Is this a good thing of “putting first things first” or simply an unjustifiable waste of resources? Why? Environmental Protection Agency (EPA) was created by the federal government of United Sates of America with the mandate to protect human wellbeing and the surroundings by implementing enactments passed by the Congress. The responsibilities of this program need considerable income to actualize among other important things.
The federal government has continued to support the implementation of the EPA program owing to its priceless benefits. Poor management of natural resources in the recent couple of decades has contributed to degradation of the environment. The cost to rehabilitate and consequently reach the expected standards is exceedingly great. Sometime the cost estimates exceeds the benefits, however, it is never a waste of resources since benefits are eventually realized on the long term. Natural calamities have befallen areas that had experienced excessive destruction of the environment due to imbalances created in natural forces.
In order to find an approximate benefit of attaining the standard, the EPA program makes use of the estimation of benefits and expenses of meeting a substitute standard to that of the existing one. In addition, the program uses complicated models of air quality measures to offer a number of estimates that support projected benefits for attaining each of the anticipated standards. Question 4 CH17 (P. 437) Concerned individuals can now seek to reduce their carbon footprint by buying offsets. Air travelers, for example, are now asked if they wish to purchase offsets when they buy their ticket.
Is it a complement or substitute for national climate change policy? Why? Purchase of offsets is a complement for national climate change policy. A reduction of carbon footprints by purchase is a way of trying to compensate for the emissions that may be produced elsewhere. However, completely eradicating national climate change policy for purchase offsets can be detrimental to the whole process. To begin with, purchase of offsets is a voluntary activity in which no one is forced to take part in. as a result, only those that feel obliged or even environmentally conscious will take part.
At the end of the day, the offsets will not be able to completely cover for the excesses produced. In addition, with the absence of a policy that guides the nation in the fight against climate change will prove quite problematic. With everyone playing their role as they wish in the fight against carbon emissions, the whole process will be chaotic. The producers that may be emitting the carbon into the atmosphere will not have anyone or anything to observe their activities. Without proper guidelines that can govern these producers, more than acceptable levels of carbon may be emitted into the atmosphere.
In that case, the offsetting program should only work side to side with the national climate change policy if there are to be any tangible fruits. Question 5 CH16 (P. 411) European countries have relied to a much greater extent on emission charges than has the United States, which seems to be moving toward greater reliance on transferable emission permits. From an efficiency point of view, should the United States follow Europe’s lead and shift the emphasis toward emission charges? Why or why not? From an efficiency point of view, the United States should follow the example of European nations in adopting emission charges.
Emission charges have the effect of increasing fuel efficiency thus regulating the amount of emissions. This will force various emitters to opt for the bet alternatives in the market that will reduce the amount of fuel being consumed. Given that there is impending threat in the amount of fuel that will be available to the public in the near future, then this will work to the advantage of everyone involved. Adoption of emission charges swill ensures that the external charges (externalities) will be reflected in the total cost of production.
Under the current setup, the producers of various services completely ignore the effect the emissions they produce have on the general population as long as they are making profits. However, charging them emission fees, the producers will be more careful in their production process. They need to produce at maximum efficiency if they are to make any tangible profits. The higher their emissions, the higher the charges in terms of emissions and as a result their profits will be reduced substantially. Efficiency will be key to avoiding large penalties that will corrode all their profits.