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Lecture 4 (Economics of Natural Resources)

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  1. Edward Dodson

    In your discussion of the justification of public goods, an important outcome of many public goods investments are increased ground rent values. Unfortunately, with few exceptions communities fail to collect these increases in values (via the tax on land values). Where infrastructure is concerned (e.g., roads, bridges, public transit lines, etc.) the increase in land values is quite immediate and often occurs merely upon announcement of the project. Economists with some expertise in these matters argue that if the public captured the increased values this would often be sufficient to cover the cost of the public investment.

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  2. Edward Dodson

    Your student raised the issuance of licenses as a solution to allocating extraction privileges to fisherman. The missing component of this solution (missing, at least in this lecture and discussion) is the basis for determining the maximum number of fish that can be removed each season without damaging the ability of the fish to rebuild their numbers. Once this limit is determined, then the licenses can be issued by competitive bidding. Of course, it is possible that very large firms would outbid all others and take control of the resource. Thus, in order to preserve a competitive situation, the rules must limit the number of ships and the size thereof that any one bidder can put in the water to extract fish.

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