Friday, March 25, 2011

A Few Interesting Papers I Read Today

It was a hectic first week back from Spring Break, but I had time to read a few of the several interesting articles that have been stacking up on my desk as of late.

R.E. Kenward et al., "Identifying governance strategies that effectively support ecosystem services, resources sustainability, and biodiversity," PNAS Early Edition (2011).
Conservation scientists, national governments, and international conservation groups seek to devise, and implement, governance strategies that mitigate human impact on the environment. However, few studies to date have systematically investigated the performance of different systems of governance in achieving successful conservation outcomes. Here, we use a newly-developed analytic framework to conduct analyses of a suite of case studies, linking different governance strategies to standardized scores for delivering ecosystem services, achieving sustainable use of natural resources, and conserving biodiversity, at both local and international levels. Our results: (i) confirm the benefits of adaptive management; and (ii) reveal strong associations for the role of leadership. Our work provides a critical step toward implementing empirically justified governance strategies that are capable of improving the management of human-altered environments, with benefits for both biodiversity and people.
Most interestingly, neither private ownership nor state ownership showed significant associations in any of the models.

Scott E. Masten and Jens Prufer, "On the Evolution of Collective Enforcement Institutions: Communities and Courts," TILEC Discussion Paper, DP 2011-017 (March 2011).
Impersonal exchange has been a major driver of economic development. But transactors with no stake in maintaining an ongoing relationship have little incentive to honor deals. Therefore, all economies have developed institutions to support honest trade and realize the gains of impersonal exchange. We analyze the relative capacities of communities (or social networks) and courts to secure cooperation among heterogeneous, impersonal transactors. Our main finding is that communities and courts are complements: They support cooperation in different types of transactions. We apply our results to the rise and fall of a medieval enforcement institution, the Law Merchant, concluding that progressive reductions in the risks and costs of transportation over long distances, driven in part by improvements in shipbuilding methods, increased first the value and then the composition of long-distance trade in ways that initially favored and later undermined this institution.
Among other interesting tidbits I learned from this paper was that states, including England, initially were reluctant to take over the task of contract enforcement as trading expanded beyond the market towns where the  (highly variable) Law Merchant applied.

John E. Parsons and Luca Taschini, "Stocks and Shocks: A Clarification in the Debate Over Price vs. Quantity Controls for Greenhouse Gases," CEEPR, 11-002 (Mar. 2011).
We construct two simple examples that help to clarify the role of a key assumption in the analysis of price or quantity controls of greenhouse gases in the presence of uncertain costs. Traditionally much has been made of the fact that greenhouse gases are a stock pollutant, and that therefore the marginal benefit curve must be relatively flat. This fact is said to establish the preference of a price control over a quantity control. The stock pollutant argument is considered dispositive, so that the preference for price controls is categorical. We show that this argument can only be true if the uncertainty about cost is a special form: all shocks are transitory. We show that in the case of permanent shocks, the traditional comparison of marginal benefits vs. marginal costs is mis-measured. The choice between quantity and price controls becomes ambiguous again and depends upon a more difficult measurement of marginal costs and benefits. The simplicity of the examples and the solutions is a major element of the contribution here. The examples are readily accessible and the comparison of results under the alternative assumptions of transitory and permanent shocks is stark.
Simply put, those who prefer carbon taxes over cap-and-trade simply based on the fact the climate change is a "stock" problem are jumping the gun.

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