Econ. 3250 Videos

Chapter 5: How Markets Work and Why they Fail

a.  Marginal and Average. Note that I don't start writing anything on the screen until almost 2 minutes into this video.

b.  Profit and, in particular, why we assume costs are subject to diseconomies of scale rather than economies of scale.  

c.  More on why perfect competition is inconsistent with economies of scale.  Here is another explanation: suppose price is constant at $5/unit, but there are economies of scale, so that if you produce 100 units, average cost is $5.50/unit (and your profit would be negative); if you produce 500 units, average cost is $4/unit (and your profit is 500 times $5-$4.50, which is $250); if you produce 5000 units, average cost is $2/unit (and your profit is 5000 times $5-$2, which is $15,000); if you produce 50,000 units, average cost is $1/unit (and your profit is 50,000 times $5-$1, which is $200,000); and if you produce 500,000 units, average cost is $0.50/unit (and your profit is 500,000 times $5-0.50, which is $2,250,000).  You can see that in this situation, the profit-maximizing plan for the firm is to produce an infinite amount of output, which will, under these assumptions, earn the firm an infinite profit.  That can't happen (consumers would never buy an infinite amount of output from this firm).  Therefore, one can't assume a constant price and also assume that economies of scale are present. That is why, since we want to assume a constant price to keep the math simple, we need to make the very unrealistic assumption that there are no economies of scale.


The video begins by stating that it'll be the last video discussing profit without environmental considerations, but it got too long, so there is actually one more video discussing profit without enviromental considerations.


d.  Profit Graphs

e.  Profit contrasted with Marginal Profit: a longer example than the one near the end of the previous video 

f.  Introduction to External Cost 

g.  Graphs of External Cost and Profit

h.  The Invisible Hand

i.   Public vs. Private Goods


Chapter 6: How Governments Fail the Environment

a.  Introduction to Government Failures

b.  Examples of Government Failures

c.  Tariffs, Part 1. What happens when a tariff is imposed.

d.  Tariffs, Part 2. A (simple) tariff hurts consumers more than it helps domestic firms.

e.  Tariffs, Part 3.  This is an example of "inefficiency."

After you watch this video: note that although the Pareto Principle would not endorse a move from (1,1,1,1) to (5,0,0,0) because that move hurts some people, if the economy had 5 "apples," then the distribution (5,0,0,0) would be Pareto-efficient (because there's no alternative that could make everyone better off), but the distribution "throw one apple away and distribute the remaining four apples (1,1,1,1)" is not Pareto-efficient (because the thrown-away apple could instead have been distributed, for example to achieve (2,1,1,1), which is a Pareto improvement over (1,1,1,1)).  Therefore, (5,0,0,0) is "Pareto efficient" = "efficient" = "Pareto Optimal" = "optimal," but most people would not consider (5,0,0,0) to be "good" or "just," and they might even prefer (1,1,1,1) to (5,0,0,0), even though the former is "not efficient" and the latter is "optimal" in the economist's technical definition of "optimal."  So just because an economist says something is "socially optimal" doesn't mean even the economist thinks it's "good"; and it certainly doesn't mean you need to think it's good.  These are value judgments.


 f.  Tariffs, Part 4.  Tariffs are not necessarily always bad.


Chapter 7: Cost-Benefit Thinking

a. The Arrow Impossibility Theorem and the Condorcet Paradox.  The Condorcet Paradox is the voting example with the three candidates which I discuss near the end of this video.  The properties of this example were discovered by Condorcet in 1785.

b.  Willingness and Ability to Pay, and Willingness to Accept, Part 1

c.  WATP and WTA, Part 2

d.  Discounting


Chapter 8: Valuing Concern for Nature

a. Total Economic Value

b.  Non-demand Approaches to Valuation.  (The book describes this topic that way; as I explain in the video, I do not agree.)

c.  Demand-curve Approaches to Valuation; Introduction to the Travel Cost Method

d.  The Travel Cost Method, Continued

e.  Hedonic Pricing

f.  Contingent Valuation and Truth-Telling

g.  The Inequality of WATP and WTA, Part 1.  Please download this handout, which is the basis of much of this video.

h.  The Inequality of WATP and WTA, Part 2.

i.  Contingent Valuation: Part-Whole, Vehicle, and Starting Point Biases

j.  Contingent Valuation: Further Problems; Empirical Trustworthiness.  The last topic in this video refers to this handout


Chapter 9: Coping with Uncertainty 

a.  Introduction to Risk and Uncertainty.  From the textbook, I discuss Box 9.1 and Box 9.2.

b.  Expected Value.  The old exam question on the St. Petersburg Paradox is here.

c.  Expected Utility: Description and Problems 1 and 2

d.  Expected Utility's Problems 3--6

e.  Final Problems with Expected Utility. I discuss the Allais Paradox and the Ellsberg Paradox (excerpts from Hal R. Varian, Microeconmic Analysis (Third Edition), 1992).  I mention two psychologists who did pioneering work questioning the Expected Utility Hypothesis: Daniel Kahnemann, who won the Nobel Prize in Economics in 2002, and his frequent co-author, Amos Tversky, who died in 1996.  Michael Lewis, who wrote the books that were made into the movies "Moneyball" and "The Big Short," wrote a book about the collaboration between Kahnemann and Tversky called "The Undoing Project: A Friendship that Changed our Minds."


Chapter 10: Using the Market to Protect the Environment

a.  The Coase Theorem, Pro

b.  The Coase Theorem, Con

c.  Methods of Government Regulation of Pollution.  Note that one method this video talks about, the Precautionary Principle, is an alternative to Cost-Benefit Analysis.  In the rest of this course, we mostly use Cost-Benefit Analysis.


Chapter 11: Charging for the Use of the Environment

a.  Direct Alteration of Prices or Costs 

b.  Indirect Alteration of Prices or Costs 


 Chapter 12: Green Taxes

a.  Pollution Taxes

b.  Abatement

c.  Two Polluting Firms, Part 1

d.  Two Polluting Firms, Part 2. Note that around the 20:00 minute mark, I say that the two firms pay the same taxes. What I meant is that they pay the same tax rate; they certainly do not pay the same amount of total taxes.

e.  More on Taxes versus Standards

f.  Box 12.1 Again

g.  Tax Incidence. At about the 10:00 mark, I slightly misspoke; here's what I meant to say:  When the flour is sold by the grain mill to the bakery, the tax is imposed not on the entire amount of that sale, but only on "that amount minus what the grain mill paid the farmer for the wheat." So the tax is on the value which the grain mill added to the grain (by making it into flour), not on the original grain. (VAT was already imposed on the original grain sale earlier; this method prevents it from being imposed twice on the same step of the production process.)

h.  International Problems 


Chapter 13: Trading Environmental Permits

a.  Introduction to Tradeable Permits

b.  Tradeable Permits Example, Part 1

c.  Tradeable Permits Example, Part 2 
d. Tradeable Permits: Problems and History
e. Tradeable Permits: Kyoto Protocol

Chapter 14: Setting Environmental Standards

Chapter 15: Renewable Resources
a. Introduction to Biological Mechanics
b. Effort vs. Yield
c. Total Revenue and Total Cost vs. Effort
d. Open Access Fisheries
e. Private Property Fisheries (static)
f.  Private Property Fisheries (dynamic)
g. Historical Fisheries, Part 1   
h. Historical Fisheries, Part 2   
i.  Historical Fisheries, Part 3   
j.  Fisheries Economics and Property Rights

Chapter 16: Non-renewable Resources
a. Malthusians                   
b. Ricardians and Cornucopians   
c. Exponential Exhaustion Indexes
d. History of Oil Prices
e. The Hotelling Rule
f.  The Hotelling Rule, Part 2
g.  A Critique of the Hotelling Rule

Chapter 17: Business and the Environment
a. Main Points
b. Genetically Modified Foods

Chapter 18: Managing Waste
a. Main Points
b. Managing Waste, Part 2

Chapter 19: Climate Change
a.  Part 1
b.  Part 2
c.  Part 3
d.  Part 4: Policy Responses

Chapter 20: Economics and the Ozone Layer

Chapter 21: Biological Diversity

Chapter 22: Acid Rain
a. Part 1
b. Part 2

Chapter 23: Environment and the Developing World
a. Part 1
b. Part 2

Introduction: The History of Environmental & Resource Economics
a. Before the 20th Century
b. The 20th Century

Chapter 1: The Big Economy
a. Introduction
b. Entropy, Part 1
c. Entropy, Part 2
d. Conclusion

Chapter 2: Environment and Ethics
a. Theories
b. Overlapping Generations
c. The Moral Reference Class
d. Schools of Thought

Chapter 3: Economic Growth, Population Growth, and the Environment
a. Optimism and Pessimism
b. Population

Chapter 4: Sustainable Development