Section Midterm Review Notes

○ Accounting identity. Not using it for doing math.
○ Used for relationships with one another
○ Impact = total environmental impact
○ Major drivers of environmental change and degradation
○ Useful for understanding and identifying rates of change
§ Rates of changes can be aggregated to see total impact.
○ How much energy is being used per unit of consumption
○ How is this applicable? If there's a % change, how does that impact the others?
○ Challenges
§ Does not recognize distributional impacts

• Sustainability
○ Used in many ways
○ Okay to have different ideas
○ Still want it as a goal, no matter what it is.
○ Can have it as a broad goal and at sector level
○ Global ecological crisis
§ Ecological = biophysical
§ Crisis=dramatic change, risk, oppty
○ Sustainability
§ Long term, system scale
○ Sustain what? For whom? How long?
• Sustainability - big idea
○ Long-term
§ past and future
§ Think intergenerationally
○ Systems approach
§ Integrity, information flows, feedback loops
§ Intersection of natural and social
○ Scale
§ appropriate scale
§ Biosphere as a global system

Collective Action
• Rational actor model
○ Goals & objectives (payoff, utility, value)
○ Alternatives
○ Consequences (outcomes)
○ Choice - choose that which ranks highest
○ Doesn't consider anything except your choices.
• Relational actor model
○ Bound by place and social norms
○ Occupy a specific social & physical space
○ Bounded space, boundaries
○ Responsibility toward place & people

Collective Action Problem
• Decision can be Individually rational but collectively suboptimal
○ Binary decision, specific payoffs
○ Highly idealized: no laws, rules disincentives
• Free Rider
○ Any player can't help/hurt much, hence the incentive to free ride
○ Structure of the game - need to operate within these confines…could be restructured
○ May not be a big impact
• Correcting the problem
○ Effective communication
○ Make commitments
○ Change the payoffs
○ Change the choices
○ Change the nature of the game
○ Negotiate
○ Change the assumptions (rational actor)

Distributive vs Integrative Bargaining
• Zone of possible agreement (ZOPA)
• Best alternative to a negotiated agreement (BATNA)
• Distributive vs. integrative
○ Either can create value for both parties
• Distributive
○ Distributive = divide
○ Limtied resources to divide "fixed pie"
○ Cannot create new options
○ Positions
○ Few interests
○ Typically don't find distributive because you can create other ptions
• Integrative
○ Interest based
○ Shared interest, "joint gains"
○ Exploit differences (interest, time, risk)

Institutional Analysis
• Institutional Framework
IWRM Example
Actors (individuals, govt, etc): Water professionals, diplomats, NGOs, and intergovernmental
Issue area: Water, watershed, hydrologic cycle, livelihoods
Rules & procedures
- Internaional conferences
- frameworks for decision-making
- engage multiple stakeholders
- (What's written down, not as deeply embedded as principles & norms)

- Social, economic, ecological uses of water
- Integrated planning
- Management at multiple scales

- Should value livelihoods and watersheds
- Should cooperate at several levels
○ Principles and norms can go together. "Should" statements

Nested Layers
• Farmers, syndic, executive committee, tribunal, coordinating committee (innermost to outermost)

Property Rights
• Property itself is an institution
• Rights & obligations
• Property regime - defines distribution of rights and responsibilities
○ Public- - individual rights divided up
○ Private - state confers use of rights
○ Common - actors within groups have rights
○ Open access is absence of rights & obligations and leads to degradation of the resource

Institutions & Scale
• When we scale up, things get messy
○ Lose face to face & trust
○ "eyes to acres" ratio
○ Ways of organizing different scales are different.
• International
○ No authority
○ Range of actors
○ Less clear boundaries
○ Useful for trans-boundary issues & when governments lack resources or legitimacy
○ Some political entities lack resources to do their own enforcement. Is it everyone's responsibility to manage Amazon Forest of Brazil?

• Bargaining
○ Power increases to extent you can move other's reservation point
○ e.g., Bloc countries to increase bargaining power
• Coercive
○ Wealth, armies, psychological, economic
• Rule making/structural
○ Being at the table, access to decision makers
○ Organizations trying to effect agenda, how negotiation unfolds because certain agenda items give them more or less power
○ EJ issues - couldn't advocate on behalf of themselves
• Normative
○ Moral authority, norms

Applying Institutional Analysis
• Understand problems for which individual aggregated decisions don't explain outcomes
• Analyze context of individual decisions
• Institutions involve actors and boundaries
• Identify overarching (constitutional) rules and principles
• Identify adaptive (operational) rules
• Identify principles
• Useful in studying common pool resources (CPR)

Consumer Theory
• Both consumer and seller are rational
• Assumption of rationality
• Possibility frontier
○ Defines what you can have
• Marginal rate of transformation
○ Rate at which you give up one thing for another
• Indifference curves
○ Decision-maker's value, willingness to trade off
• Consumer theory
○ Non-satiation, declining marginal rate of substitution, budget constraints

• Out them together: the consumer's best choice

Market Theory
• Firms sell factors of production, no fixed
• Higher factors of production…
• Supplier maxmize profit where MC = MR
• Proft = area above supply curve, below P
• Competitive equilibrium
○ Crossover where willingness to pay (WTP) = willingness to supply
• Pareto efficiency
○ No improvement possible without someone losing
• Consumers consume based on WTP
• Suppliers supply at MC = MR
• Equilibrium is crossover point
• Markets aggregate an overwhelming amount of info that's difficult to replicate under central planning