Notes on market failure and the Paretian (Kaldor-Hicks) relevance and irrelevance of unfavourable externalities

The following are notes that have been distributed by me over the last few years to students in Environmental Economics at The University of Queensland. They give particular attention to whether externalities are Pareto or Kaldor-Hicks relevant from a policy point of view. Externalities are Kaldor-Hicks or Pareto irrelevant if no change is possible for which gainers could compensate losers. Both absolute and marginal externalities may be Kaldor-Hicks relevant. Infra-marginal negative externalities are often, but not always, Kaldor-Hicks irrelevant. There are at least two cases where such externalities can be relevant. First, the absolute impact of the negative externality may be so great that the source of the externality should be eliminated. Secondly, if the externality arises from production, its nature may depend on the type of production technique adopted. Although for the technique adopted, an infra-marginal negative externality occurs. That is Paretian irrelevant given that choice of this technique is the only available possibility, alternative techniques may actually be available in practice. Some of these may generate even smaller total external effects and be socially preferable. Both cases are outlined and illustrated in these notes. The analysis reveals the dangers of relying on marginalism for deciding on environmental policy. Total (external) effects are often of great social and economic importance and appropriate social choices cannot be made on the basis of marginalism alone.

Willingness to pay for conservation of the Asian elephant in Sri Lanka: A contingent valuation study

Results from a CVM survey of willingness to pay for the conservation of the Asian elephant of a sample of urban residents in three selected housing schemes in Colombo, the capital of Sri Lanka, are reported. Face– to–face surveys were conducted using an interview schedule. A non-linear logit regression model was constructed to analyse the respondents’ responses for the payment principle questions and to identify the factors that influence their responses. We investigate whether urban residents’ WTP for the conservation of elephants is sufficient to compensate farmers for the damage caused by elephants, and consequently to raise farmers’ tolerance of the presence of elephants on the farming fields. We find that beneficiaries (the urban residents) could compensate losers (the farmers in the HEC affected areas) and be better off than in the absence of elephants in Sri Lanka. This suggests that there is a strong economic case for the conservation of the wild elephant population in Sri Lanka. However, we have insufficient data to determine Sri Lanka’s optimal elephant population in the Kaldor-Hicks sense.

The net benefit of saving the Asian Elephant: A policy and contingent valuation Study

Reports results from a contingent valuation survey of willingness to pay for the conservation of the Asian elephant of a sample of urban residents living in three selected housing schemes in Colombo, the capital of Sri Lanka. Face–to–face surveys were conducted using an interview schedule. A non-linear logit regression model is used to analyse the respondents’ responses for the payment principle questions and to identify the factors that influence their responses. We investigate whether urban residents’ willingness to pay for the conservation of elephants is sufficient to compensate farmers for the damage caused by elephants. We find that the beneficiaries (the urban residents) could compensate losers (the farmers in the areas affected by human–elephant conflict) and be better off than in the absence of elephants in Sri Lanka. Therefore, there is a strong economic case for the conservation of the wild elephant population in Sri Lanka. However, we have insufficient data to determine the optimal level of this elephant population in the Kaldor-Hicks sense. Nevertheless, the current population of elephant in Sri Lanka is Kaldor-Hicks preferable to having none.

The net benefit of saving the Asian elephant: a policy and contingent valuation study

Reports results from a contingent valuation (CV) survey of willingness to pay (WTP) for the conservation of the Asian elephant of a sample of urban residents living in three selected housing schemes in Colombo, the capital of Sri Lanka. Face-to-face surveys were conducted using an interview schedule (IS). A non-linear logit regression model is used to analyse the respondents' responses for the payment principle questions and to identify the factors that influence their responses. We investigate whether urban residents' WTP for the conservation of elephants is sufficient to compensate farmers for the damage caused by elephants. We find that the beneficiaries (the urban residents) could compensate losers (the fanners in the areas affected by human-elephant conflict, HEC) and be better off than in the absence of elephants in Sri Lanka. Therefore, there is a strong economic case for the conservation of the wild elephant population in Sri Lanka. However, we have insufficient data to determine the optimal level of this elephant population in the Kaldor-Hicks sense. Nevertheless, the current population of elephant in Sri Lanka is Kaldor-Hicks preferable to having none. (C) 2003 Elsevier B.V. All rights reserved.

A randomized controlled trial assessing the health economics of realtime teledermatology compared with conventional care: an urban versus rural perspective

A randomized controlled trial was carried out to measure the cost-effectiveness of realtime teledermatology compared with conventional outpatient dermatology care for patients from urban and rural areas. One urban and one rural health centre were linked to a regional hospital in Northern Ireland by ISDN at 128 kbit/s. Over two years, 274 patients required a hospital outpatient dermatology referral -126 patients (46%) were randomized to a telemedicine consultation and 148 (54%) to a conventional hospital outpatient consultation. Of those seen by telemedicine, 61% were registered with an urban practice, compared with 71% of those seen conventionally. The clinical outcomes of the two types of consultation were similar - almost half the patients were managed after a single consultation with the dermatologist. The observed marginal cost per patient of the initial realtime teledermatology consultation was f52.85 for those in urban areas and f59.93 per patient for those from rural areas. The observed marginal cost of the initial conventional consultation was f47.13 for urban patients and f48.77 for rural patients. The total observed costs of teledermatology were higher than the costs of conventional care in both urban and rural areas, mainly because of the fixed equipment costs. Sensitivity analysis using a real-world scenario showed that in urban areas the average costs of the telemedicine and conventional consultations were about equal, while in rural areas the average cost of the telemedicine consultation was less than that of the conventional consultation.

Effect of Metalaxyl Resistance and Cultivar Resistance on Control of Phytophthora nicotianae in Tobacco

Phytophthora nicotianae is a devastating root and stem pathogen of tobacco (Nicotiana tabacum) in South Africa. Growers strive to control the resulting disease, known as black shank, with metalaxyl treatments and resistant cultivars. The aim of this study was to consider whether development of metalaxyl resistance in P. nicotianae has contributed to poor disease control and if recently developed cultivars with high levels of resistance require metalaxyl for effective control. One hundred and thirty-two isolates of P. nicotianae were screened for sensitivity to metalaxyl. P. nicotianae isolates from most tobacco farms were metalaxyl sensitive. Growth of most isolates was inhibited completely at 1.0 μg a.i./ml. However, isolates from the MKTV tobacco producing area showed EC50 values ranging from 1.02 μg a.i./ml to 3.57 μg a.i./ml. Twenty-one tobacco cultivars were planted and treated with and without metalaxyl in two different growing seasons to evaluate their resistance to P. nicotianae and the value of using metalaxyl. Hicks was the most susceptible cultivar. Vuma/3/46, LK30/40/60-1, and LK33/60 exhibited the greatest resistance to P. nicotianae. Use of metalaxyl in combination with moderately resistant cultivars such as NC60 × TL33 and LK10/80/60 effectively reduced black shank in the field. Resistant cultivars were healthy and no significant difference between metalaxyl treated and untreated plants was observed.

Evidence for endothermic ancestors of crocodiles at the stem of archosaur evolution

Physiological, anatomical, and developmental features of the crocodilian heart support the paleontological evidence that the ancestors of living crocodilians were active and endothermic, but the lineage reverted to ectothermy when it invaded the aquatic, ambush predator niche. In endotherms, there is a functional nexus between high metabolic rates, high blood flow rates, and complete separation of high systemic blood pressure from low pulmonary blood pressure in a four-chambered heart. Ectotherms generally lack all of these characteristics, but crocodilians retain a four-chambered heart. However, crocodilians have a neurally controlled, pulmonary bypass shunt that is functional in diving. Shunting occurs outside of the heart and involves the left aortic arch that originates from the right ventricle, the foramen of Panizza between the left and right aortic arches, and the cog-tooth valve at the base of the pulmonary artery. Developmental studies show that all of these uniquely crocodilian features are secondarily derived, indicating a shift from the complete separation of blood flow of endotherms to the controlled shunting of ectotherms. We present other evidence for endothermy in stem archosaurs and suggest that some dinosaurs may have inherited the trait.

The origin and evolution of the surfactant system in fish: Insights into the evolution of lungs and swim bladders

Several times throughout their radiation fish have evolved either lungs or swim bladders as gas-holding structures. Lungs and swim bladders have different ontogenetic origins and can be used either for buoyancy or as an accessory respiratory organ. Therefore, the presence of air-filled bladders or lungs in different groups of fishes is an example of convergent evolution. We propose that air breathing could not occur without the presence of a surfactant system and suggest that this system may have originated in epithelial cells lining the pharynx. Here we present new data on the surfactant system in swim bladders of three teleost fish ( the air-breathing pirarucu Arapaima gigas and tarpon Megalops cyprinoides and the non-air-breathing New Zealand snapper Pagrus auratus). We determined the presence of surfactant using biochemical, biophysical, and morphological analyses and determined homology using immunohistochemical analysis of the surfactant proteins (SPs). We relate the presence and structure of the surfactant system to those previously described in the swim bladders of another teleost, the goldfish, and those of the air-breathing organs of the other members of the Osteichthyes, the more primitive air-breathing Actinopterygii and the Sarcopterygii. Snapper and tarpon swim bladders are lined with squamous and cuboidal epithelial cells, respectively, containing membrane-bound lamellar bodies. Phosphatidylcholine dominates the phospholipid (PL) profile of lavage material from all fish analyzed to date. The presence of the characteristic surfactant lipids in pirarucu and tarpon, lamellar bodies in tarpon and snapper, SP-B in tarpon and pirarucu lavage, and SPs ( A, B, and D) in swim bladder tissue of the tarpon provide strong evidence that the surfactant system of teleosts is homologous with that of other fish and of tetrapods. This study is the first demonstration of the presence of SP-D in the air-breathing organs of nonmammalian species and SP-B in actinopterygian fishes. The extremely high cholesterol/disaturated PL and cholesterol/PL ratios of surfactant extracted from tarpon and pirarucu bladders and the poor surface activity of tarpon surfactant are characteristics of the surfactant system in other fishes. Despite the paraphyletic phylogeny of the Osteichthyes, their surfactant is uniform in composition and may represent the vertebrate protosurfactant.

Partitioning of respiration between the gills and air-breathing organ in response to aquatic hypoxia and exercise in the Pacific tarpon, Megalops cyprinoides

The evolution of air-breathing organs (ABOs) is associated not only with hypoxic environments but also with activity. This investigation examines the effects of hypoxia and exercise on the partitioning of aquatic and aerial oxygen uptake in the Pacific tarpon. The two-species cosmopolitan genus Megalops is unique among teleosts in using swim bladder ABOs in the pelagic marine environment. Small fish ( 58 - 620 g) were swum at two sustainable speeds in a circulating flume respirometer in which dissolved oxygen was controlled. For fish swimming at 0.11 m s(-1) in normoxia (Po-2 = 21 kPa), there was practically no air breathing, and gill oxygen uptake was 1.53 mL kg(-0.67) min(-1). Air breathing occurred at 0.5 breaths min(-1) in hypoxia ( 8 kPa) at this speed, when the gills and ABOs accounted for 0.71 and 0.57 mL kg(-0.67) min(-1), respectively. At 0.22 m s(-1) in normoxia, breathing occurred at 0.1 breaths min(-1), and gill and ABO oxygen uptake were 2.08 and 0.08 mL kg(-0.67) min(-1), respectively. In hypoxia and 0.22 m s(-1), breathing increased to 0.6 breaths min(-1), and gill and ABO oxygen uptake were 1.39 and 1.28 mL kg(-0.67) min(-1), respectively. Aquatic hypoxia was therefore the primary stimulus for air breathing under the limited conditions of this study, but exercise augmented oxygen uptake by the ABOs, particularly in hypoxic water.