284 劭叩 r ノイ S ″ 0 れ砿 So 切 c 記耘 PO ″ 0 れ Seskin, Eugene P. , R0bert J. Anderson, and R0bert O. Reid. "An Empirical Analysis 0f Economic Strate- gies for Confr011ing Air P011ution," 面″ m 記砿 E れリ耘 0 れ襯 e れ I Economics and Ma れ ge 襯例 / 10 (June 1983 ) : 112 ー 24. DISCUSSION QLIES 0N5 1. As shown in Example 14.3 , the efficient regulation 0f hazardous pollutants should take exposure int0 account—the more persons exposed t0 a given pollutant concentration, the larger is the dam- age caused by it and therefore the smaller is the efficient concentration level, all 0ther things being equal. An alternative point 0f view would simply ensure that concentrations be held below a uni- form threshold, regardless 0f the number of pe 叩 le exposed. From this latter point ofview, the pub- lic policy goalis tO expose any and all people tO the same concentration level—exposure is not used tO establish different concentrations for different settings. What are the advantages and disadvan- tages 0f each 叩 proach? Which d0 you think represents the best approach? WhY? 2. European countries have relied tO a much greater extent on emission charges than has the United States, which seems tO be moving toward a greater reliance on transferable emission permits. From an efficiency point 0f view, should the United States follow Eur 叩 e's lead and shift the emphasis toward emission charges? Why or why not?

市″記 e ルれ c 239 ADDITIONAL R 庇 R を NC を 5 Anderson, Lee G. The Economics 砿 F なん / Management(BaItimore: Johns H 叩 kins University press, 1977 ). Areason, R. "The lcelandic lndividual Transferable Quota system: A Descriptive Account," Marine ResourceEconomics 8 ( 1993 ) : 201 ー 18. Bell, Frederick W. 00 庁 0 襯 2 立仏・ The Economics and politics 砿 Oc れた s (Boulder, co: Westview Press, 1978 ). Boyce, J0hn R. "lndividual Transferable Quotas and production ExternaIities in a Fishery, ' ルル ral Resource MO ″れ 0 8 ( 1992 ) : 385708. Brown, Lester. 加 the 〃″襯加尾 (New York: W. W. Norton, 1974 ). CampbelI, H. F. , and R. K. Lindner. "The Production of Fishing Effort and the Economic performance of License Limitation Programs," んロれ Eco れ om / cs 66 (February 1990 ) : 56 ー 66. Cheng, Juo-Shung, et al. "AnaIysis of Modified Model for Commercial Fishing with possible Extinctive Fishery Resources," ″ m 砿 E れ ro れ襯 lEco れ 0 襯た s イ Ma れ 20e 襯 / 8 (June 1981 ) : 151 ー 55. CIark, C. W. "Profit Maximization and the Extinction of AnimaI Species," 面″ rn 記砿 po ″″ c 記 Eco れ 0 襯 81 (August 1973 ) : 950-60. Clark, CoIin W. ロ e 襯″ c 記 B わ eco れ 0 た s. ・ The 0 〃″ m M れロ ge 襯 e 砿 e れ e Resources (New York: Wiley lnterscience, 1976 ). Dupont, Diane P. "Rent Dissipation in Restricted Access Fisheries, ”面″記砿 E れ ro れ襯 / Eco れ 0 襯 - ics イ M れ襯例ー 19 (JuIy 1990 ) : 2674. FAO, The S ね砿 00d c ル尾 . ・ 7992 (Rome: Food and AgricuIture ()rganization of the United Nations, 1992 ). Gallastegui, Carmen. "An Economic AnaIysis of sardine Fishing in the Gulf of Valencia (Spain)," 面″ rn 記 砿 E れ ro れ m 例ね I Economics れ Ma れ ge 襯 e 10 (June 1983 ) : 138 ー 50. Geen, Gerry, and Mark Nayar. "lndividual Transferable Quotas in the Southern Bluefin Tuna Fishery: An Economic Appraisal," M 加 2 Resource Economics 5 ( 1988 ) : 365 ー 88. Gordon, H. Scott. 'The Economic Theory of a Common-Pr 叩 erty Resource: The Fishery," 面″ rn 記砿 Po ″″ c 記 Eco れ 0 襯 62 (April 1954 ) : 124 ー 42. ludicello, Suzanne, et al. F なんんな , イ催襯例 . ・ The Economics 砿 0 r んれ 0 (Washington, DC: lsland Press, 1999 ). MerrifieId, J. "lmplementation lssues: the Political Economy of Efficient Fishing," Eco わグ c 記 Eco れ 0 襯 - ics, VoI. 30 , No. 1 (July, 1999 ) : 5 ー 12. Munro, G. R. "Fisheries, Extended Jurisdiction, and the Economics of Common-Property Resources," Ca れ口市れ面″記砿 ECO れ 0 襯 / cs 15 (August 1982 ) : 405 ー 25. Muse, Ben, and Kurt Schelle. "New ZeaIands's ITQ Program," AIaska Commercial Fisheries Entry Com- mission Paper NO. CFEC 8 & 3 (June 1988 ). Muse, Ben, and Kurt Schelle. "lndividual Fisherman's Quotas: A PreIiminary Review of Some Recent Programs," Alaska Commercial Fisheries Entry Commission P 叩 er NO. CFEC 89-1 (February 1989 ). National Research Council Committee to Review lndividual Fishing Quotas. S 加 0 the なん To 池 ルわれ記 PO ″ cy 0 れ F なんれ Q ″ 0 s (Washington: NationaI Academy Press, 1999 ).

72 劭叩 r イ怦叩催カな , E. e 記液 , ロれイ E れれ襯例 / 怦襯 s suggests hOW they might be resolved—by realigning individual incentives tO make them com- patible with collective objectives. AS self-evident as this 叩 proach may be, it is controversial (see Example 4.4 ). The controversy involves whether the problem is our improper values or the improper translation Of our quite proper values intO action. Economists have always been reluctant tO argue that values Of consumers are warped, because that would necessitate dictating the "correct ” set Of values. BOth capitalism and democracy are based on the presumption that the majority knows what it is dOing, whether it is casting ballots for representatives or dOllar votes for goods and services. RELIGION AS THE SOURCE 0F ENVIRONMENTAL PROBLEMS One Of the many alternative explanations Of the sou. rce Of environmental problems was advanced by historian Lynn White, Jr. His thesis, simply put, is that the environmental crisis is due tO the teachings 0f Judaism and Christianity, which in Western culture have created a warped view 0f the proper relationship between humans and their environment. The basis for this thesis is to be found in the first book of the Old Testament: e れ God 既可襯 2 襯加 0 ″ r ~ 襯ロ ye , ″催 0 ″ r ″ん e れ s , ・れ d / e 襯 面襯加われ the 乃砿 e d the わか砿 e air, れ d 側催 the cattle, andover 〃 the ea んれイ 0 r every c 尾印加 0 肱加 0 肱 creeps ″〃 0 れ the r 肱 " / Ge れ . ノッ TWO aspects Of this passage are crucial tO his argument: ( 1 ) GOd created man in His own image, and ( 2 ) man was given dominion over the 0ther forms 0f life. B0th 0f these aspects make man the dominant force on earth and, according t0 White, suggest that "it is GOd's will that man exploit nature for his pr 叩 er ends. ' White also makes the point that, among the world's reli- gions, thiS iS a unique View Of the human-environment relationship. His policy solution follows directly: 0 sc たれ ce れ d 襯 0 ch れ 0 あ尾れ 00 加ね get 0 ″ー砿 epr おー eco んグ c c - sis ″れ龍 we れれ 2 I われ , 加ん 0 ″ r 0 0 れ e ゆ . 720 デ . White believes that we must adopt new values which reject the primacy of humans and ele- vate the stature Of natu re. This view provides a stark contrast tO the economics 叩 proach, which suggests that the problem is neither the primacy Of humans nor warped values but an imperfect translation of those values intO practice. Sources: Lynn White, Jr. , "The Historical R00ts of Ec010gic Crisis," Science 155 (March 10 , 1967 ) : 1203 ー 1207 ; E. F. schu- macher, "Buddhist Economics," in S 襯な Bea ″″ル / (New York: Harper Col 叩 hon Books, 1973 ) : 50 ー 58 ; Keith Thomas, 2 れイ 2 ル″ ra / の (New York: Kn 叩 f, 1983 ) : 17 ー 25.

106 劭叩 r 6 The P 叩記朝れ怦襯 THE VALUE 0F AN AVERTED BIRTH If population growth tends tO reduce average income, then the nation experiencing this popula- tion growth would have an incentive tO spend money on population control. Determining hOW much money should be spent depends upon a comparison Of the costs Of the population control program with the value Of an averted birth. Enke and Zind devel 叩 ed a simulation model t0 assess the value 0f an averted birth. The model allowed for substitution among capital and labor, the restraining effect 0f a large number Of dependent, nonproducing youths, and the effect Of an age structure and income on savings. To obtain the value Of averted births, they compared a scenario with no birth control tO one in which a reduction in fertility over a 30-year periOd was compatible with 50 percent Of all women in each age group practicing contraception. The implied terminal fertility rate was approxi- mately 23 per 1 , 000. On the basis of this simulation they concluded: 員襯 0 わ肱 CO れ〃 01 〃 0 襯襯 e. , CO 豆加 0 〃 e 〃 s 30 cents ar 〃催ん砿れわれ記 〃叩″″ 0 れ , ca れ川な e rage 襯 CO 襯 e 0 怩 r 0 れノ 5 ea 記襯 0 twice the P 催 c 例 ge ″ 0 ″ rise / 0 ″ーわか CO れ〃 01.... The ん e 砿〃襯れ e れ一〃尾れ″れ 0 the わか 砿襯加記加れ行わ 0 ″ー twice ロれ LDC'S / d 卲 elO 〃記 CO ″れ〃れれ″記加 CO 襯 2 〃催 This is a controversial finding. There is not uniform agreement that the simulated mecha- nisms approximate those that would actually prevail in developing countries, particularly if the population growth is moderate rather than r 叩 id. Nonetheless, it does suggest that for those countries that are experiencing very rapid population growth, the potential payoff tO instituting means 0f controlling that population growth could be substantial. Sources: S. Enke and R. Zind, "Effect 0f Fewer Births on Average lncome, ”面″矼ösoc I Science 1 ( 1969 ) : 41 ー 55 ; Julian L. S imon, The Economics 砿 P 叩われ Growth (Princeton, NJ : Princeton University Press, 1977 ). people care about inequality because it can create SOCial tensions. 、、齏 en these SOCial tensions exist, society is a less pleasant place tO 1 ⅳ e. 11 The demand tO reduce income inequality clearly exists in modern society, as evidenced by the large number 0f private charitable organizations created t0 fulfill this demand. Because the reduction Of income inequality is a public good, we alSO know that these organizations cannot 11See Linda FeIdman, "Study CorreIates PopuIation Rise, PoliticaI lnstability," 2 C ん r な″れ Science Mo れ″ ( 26 June 1989 ) : 8.

Discussion Q ″ es ″ 0 れ SUMMARY 29 The relationship between humanity and the envlronment requires many choices, Some basis for making rational choices is absolutely necessary. If not made by design, decisions will be made by default. The economics approach views the environment as a composite asset, supplying a variety Of services tO humanity. The intensity and composition Of those services depend on the actions Of humans as constrained by physicallaws, such as the first and second laws Of thermodynamics. Economics has ⅲ , 0 rather different means Of enhancing understanding Of environmental ibing the actions Of peo- and natu ral resource e conomi CS. P_Q5iti.ye_e_conomiC5_is__usefuI_in. _descr le and the impact Of those actions on the environmental asset. Normative economICS can provide guidance on hOW optimal service flows can be defined and achieved. Normative economics invokes benefit-cost analysis for judging the desirability Of the level and composition Of provided services. A static efficient allocation is one that maximizes the net benefit over all possible uses Of those resources. The dynamic efficiency criterion, which is appropriate When time iS an important consideration, iS satisfied When the outcome maximizes the present value 0f net benefits from all possible uses 0f the resources. Future chapters exam- ine the degree tO which our social institutions yield allocations that conform tO these criteria. FURTHER READING Freeman, A. Myrick III. The 川 e 襯 e 砿 E れ ro れ襯 e れね I れイ Re ce ん , 2nd ed. (Washington, DC: Resources for the Future, lnc. , 2003 ). A comprehensive and analytically rigorous survey 0f the concepts and methods for environmental valuation. HanIey, Nick, and Clive L. Spash. CO - 召 ene れ s なれ d 2 E れれ襯 e (Brookfield,VT: Edward EIgar Publishing Company, 1994 ). An up-to-date account 0f the theory and practice 0f benefit-cost analysis 叩 plied tO environmental problems. Contains a number Of specific case studies. Kelman, steven. ℃ ost-Benefit Analysis—An Ethical Critique,' R ″″ 0 れ (January/February 1981 ) , 3370. KeIman suggests that attempts t0 expand the use 0f benefit-cost analysis in the areas Of environmental, health, and safety regulation raise troubling ethical questions. ADDITIONAL REFEREN C を 5 Burness, stuart, Ronald Cummings, Glenn Morris, and lnga Paik. "Thermodynamic and Economic Con- cepts as Related t0 Resource—Use P01icies," んれ dEC0 れ 0 襯 / cs 56 (February 1980 ) : 1 ー 9. Krutilla,J0hn. ℃ onservation Reconsidered," e 襯た an Ec 伽 0 襯た R 卲盟 57 (September 1968 ) : 777 ー 786. DISCUSSION QLI を 5 ON 1. lt has been suggested that we should use the "net energy" criterion t0 make choices among various types 0f energy. Net energy is defined as the t0tal energy content in the energy source minus the energy required tO extract, process and deliver it tO consumers. According tO this criterion' we should use those sources with the highest net energy content first. Would the dynamic efficiency criterion and the net energy criterion be expected tO yield the same choice? WhY or why not?

XXiV P ce Fikret Berkes Trond Björndahl Sidney M. BIumner Vic Brajer Stacy Br00k Richard Bryant David Burgess Mary A. Burke Richard V. ButIer Trudy Ann Cameron Duane Ch 叩 man Charles J. Chicchetti Gregory B. Christiansen Hal Cochrane Jon Conrad William Corcoran Maureen L. Cropper John H. CumberIand Herman E. DaIy Diane P. Dupont Randall K. Filer Ann Fisher Anthony C. Fisher Marvin FrankeI A. Myrick Freeman Ⅲ James Gale David E. GaIIo Haynes G0ddard Nicholas Gotsch Doug Greer Ronald Griffin W. Eric Gustafson A. R. Gutowsky Jon D. Harford Gloria E. Helfand Ann HeIwege Joseph A. Herriges John J. Hovis Paul Huszar Craig lnfanger Allan Jenkins Donn Johnson James R. Kahn Chris KavaIec Derek KeIIenberg Brock University Norwegian SchOOl Of Economics and Business Administration CaIifornia State P01ytechnic UniversitY—Pomona CaIifornia State UniversitY, Fullerton University 0f Sioux Falls University 0f Missouri—ROIla University Of Western Ontario FIorida State University Trinity University UCLA CorneII University University Of Wisconsin—Madison CaIifornia State University—Hayward COIorad0 State University CorneII University University 0f Nebraska at ()maha University 0f Maryland University 0f Maryland University 0f MaryIand University 0f Guelph Hunter COIIege Pennsylvania State University University 0f California—Berkeley University 0f Illinois—Urbana-Champaign Bowd0in C011ege Michigan Techn010gical UniversitY CaIifornia State University—Chico University Of Cincinnati lnstitute 0f Agricultural Economics (Zurich) San Jose State University Texas A&M Univers i University 0f CaIifornia—Davis CaIifornia State University—Sacrament0 CIeveIand State University University 0f Michigan Tufts Univers ity lowa State Unive rs ity University 0f Maryland CoIorado State University University 0f Kentucky University 0f Nebraska at Kearney Quinnipiac C011ege Washington and Lee University Sacrament0 State University 0f C010rad0 Boulder

0 ″ : The C I 怦 0 房 em 141 lower prices maxlmize profits. Thus, successful cartelization presupposes a means for detect- ing cheating and enforcing the collusive agreement. 3 ln addition t0 cheating, however, there is another threat tO the stability 0f cartels—the degree t0 which members fail tO agree on pricing and output decisions. 0i1 provides an excel- lent example 0f how these dissensions can arise. Since the 1974 rise 0f OPEC as a world power, Saudi Arabia has exercised a moderating influence on the pricing decisions 0f OPEC. Why? One highly significant reason is the size 0f Saudi Arabia's 0iI reserves (see Table 8.1 ). Saudi Arabia holds 叩 proximately 33 percent Of the OPEC proven reserves; its reserves are larger than those Of any other member. Because Of this, Saudi Arabia has an incentive t0 preserve the value of those resources. lt is worried about setting prices SO high as tO undercut the future demand for its 0 ⅱ . As was stated earlier, the demand for Oil in the long run is more price elastic than in the short run. Meanwhile, the countries with smaller reserves know that in the long run their reserves will be gone, and they are more concerned about the near future. Because alternative sources 0f supply are not much Of a threat in the near future because Of long development times, Other countries want tO extract as much rent as possible now. The size of Saudi Arabia's production also gives it the potential tO make its influence felt. lts capacity tO produce is so large that it can unilaterally affect world prices. ln January 1981 , for example, it was producing approximately 10.3 million barrels 0f crude 0i1 a day— representing about 41 percent 0f all OPEC production. Cartelization is not an easy path for producers tO pursue. However, when it is possible it can be very profitable. When the resource is a strategic and pervasive raw material, carteliza- tion can be very COStly for consuming nations. TABLE 8.1 The WorId's Largest 0 ⅱ Reserves CO ″ Saudi Arabia lraq United Arab Emirates Kuwait lran Venezuela Russia Mexico Libya China United States Nigeria R e 耀 ( 加″わ砿な e な ) 261.5 112.5 97.8 96.5 93.0 71.7 48.6 40.0 29.5 24.0 22.5 16.8 source: 0 ″れイ Gas 面″ rn (http://www.eia.doe.gov/emeu/iea/table81.htm). 3During February, 1985 , OPEC hired a large Dutch accounting firm t0 help it detect cheating among its members. See "Dutch Accountants Take on a Formidable Task: Ferreting out ℃ heaters' in the Ranks 0f OPEC"' The Ⅲ″ & 盪 面″記 ( 26 February 1985 ) : 39.

Efficiencu れイ CO - Efi 尼 c ″れお 5 353 ANATOMY 0F AN OIL SPILL SUIT: THEAMOCO 朝ル On 17 March 1978 , the 襯 0C0 Ca 市 2 , an 0i1 transport ship traveling in a bad storm, lost steering control and, after unsuccessful towing attempts, drifted onto the rocks off the shore of Portsall, France, on the Brittany coast. UItimateIy, the ship broke in two and discharged 220 , 000 tons of crude 0 ⅱ and 4 , 000 tons Of bunker fuels along the cost of a resort area, 0 months prior to the opening Of the tourist season. Before the end of the year of the grounding, a mountain of claims had been filed involving France, a consortium Of resort owners and fishermen, Am0CO (the owner of the vessel), Bugsier (the owner 0f the tug), Shell OiI (the owner of the oil being carried at the time), and Astilleros Espafioles (the Spanish company that built the 襯 0C0 Ca イた ). After extensive and expensive preparations by all parties, the trial began in May 1982. During March 1984 a preliminary 叩 inion was issued finding Amoco and the shipbuilder jointly liable. The process then turned to the separate issue of the magnitude of the damages to be awarded. On 21 February 1989 , a judgment of 670 million francs (approximately $ 120 mil- lion) was levied against Amoco and Astilleros. The verdict was immediately appealed. The trial judge, now retired from the bench, summed up the situation: SO カ e we 尾 , twelve e ″ the acc れ 4 ツ卲 e れ ye ″ the 5 ″″〃必″ん the がれたアな加〃 0 e われ砿れ例襯 0 0 襯例ーれイ s ″り e けね e れ or 襯 0 / 記 fees 盟″ん 0 0 れ e ce れ / ん 2 れ ch れ ge イん . 2 case 襯 ch 0 れ盟砿ん the Co of 員〃〃な 面 each 〃 r 加 c ゆ記〃 expected ん叩〃 e 記 those 〃 ec な砿 the 〃れ記 me 面 盟ん c ん市 ee. な raises the 〃 os 豆わ市 , 記襯 0 ″川切加 , わ配 the ん 0 case co ″ん e ね be 〃 d れ . Source: Frank J. McGarr, "lnadequacy of Federal Forum for Resolution of 0 ⅱ Spill Damages," a talk given at a conference on 0 ⅱ spills at Newport, Rh0de lsland, on 16 May 1990. Judge McGarr was the trial judge for theAmoco C 市 2 case. citizen suits would have no ro 厄 tO play. Noncompliance iS a necessary condition for a success- ful suit. ln the early 1980S when public enforcement decreased, private enforcement—citizen suits—increased tO take up the slack. Lax public enforcement appears t0 have played a signif- icant role in the rise Of citizen suits. AII attorneys' fees incurred by the citizen group in any successful action under the Clean Water Act must be reimbursed by the defendants. Reimbursement of attorneys' fees has affected both the level and focus 0f litigation activity. ByIowering the costs 0f bringing citizen suits, attorney fee reimbursement has allowed citizen groups tO participate far more Often in the enforcement process than otherwise would have been possible. Because courts only reim- burse for appropriate claims (noncompliance claims that are upheld by the court), citizen groups are encouraged tO litigate only appropriate cases.

118 朝叩 / 催 7 ル記 R 0 ″尾 e Eco れ 0 襯沁 : れ 0 耀 absence Of a renewable substitute provides a focal POint for the analysis. Succeeding chapters will use these principles bOth tO examine the allocation Of energy, fOOd, and water resources and as a basis for developing more elaborate models Of renewable biological populations such as fisheries and forests. ◆ A RESOURCE TAXONOMY in any reasonable time frame. ment for these resources is so low that it does not offer a potential for augmenting the stock which the natural-replenishment feedback lo 叩 can safely be ignored. The rate of replenish- includes all depletable, recyclable resources, such as c 叩 per. A がル 50 ce is one for Other distinctions among resource categories are also useful. The first such category endowment. Exactly hOW much smaller cannot yet be determined with any degree Of certainty. likely that the maximum feasible size Of the potential reserves is smaller than the resource or future society would be willing tO pay the price necessary tO extract them. Thus, it seems Certain mineral resources are SO COStly tO extract that it iS inconceivable that any current infinite price is not likely. nite price were possible, then the entire resource endowment could be exploited. However, an available as potential reserves at some price people would be willing tO pay. Clearly, if an infi- A second C01 第 mon mistake iS tO assume that the entire resource endowment can be made lead to concluslons wide the mark. sented the maximum potential reserves. As Example 7.1 indicates, this fundamental error can failing tO respect these distinctions is that Of using data on .current reserves as if it repre- The distinctions among these three concepts are significant. One common mistake in sents an ypp-erJimit on the availability Of terrestrial resources. is a geological rather than an economic concept. This concept is important because it repre- crust. Because prices have nothing tO dO with the size Of the resource endowment;the latter The resource e れイ 0 ″れ e / represents the natural occurrence -Of resources in the earth's increases, the amount Of Oil that can be economically recovered also increases (Table 7.1 ). than conventional ones, allow greater amounts Of 0 ⅱ tO be recovered. AS the price per barrel vents or steam intO the well tO lower the density 0f the Oil. These techniques, more expensive be recovered from existing 0 ⅱ fields using enhanced recovery techniques such as injecting SOI- reserves. For example, Congress conducted a study on the amount Of additional 0i1 that could pe 叩 le are willing t0 pay for those resources—the higher the price, the larger the potential rather than a number. The amount Of reserves potentially available epends upon the price as a number. PO れ″記耀 , on the Other hand, are most accurately defined as a function itably be extracted at current prices. The magnitude Of these current reserves can be expressed C ″″ e れ一耀 (white area in Figure 7.1 ) are defined as known resources that can prof- uncertainty about the size Of the resource base. stantially higher prices. A movement from left tO right represents increasing geological bottom represents movement from cheaply extractable resources tO those extracted at sub- NOtice the れ V() dimensions one economic and one geological. A movement from top tO base, and it has developed the classification system described in Figure 7.1. logical Survey (USGS) has the official responsibility for keeping records 0f the U. S. resource reserves, ( 2 ) 〃例 I r e , and ( 3 け 0 ″ rce 例盟襯例た ln the United States the U. S. Geo- Three separate concepts are used tO classify the stock 0f depletable resources: ( 1 ) ″例ー

The Growth 片 oce 415 cleaner equipment may have raised productivity by forcing firms tO invest in newer and more efficient equipment. For industries in the United States, a common finding seems to be that somewhere in the neighborhood 0f 12 percent 0f the responsibility 0f the productivity slow- down can be attributed tO environmental regulations. 7 If these conclusions are at all accurate, environmental policy does not bear responsibility for much Of the decline in the economic growth rate in the late 1970S. Energy A second possible source Of growth drag iS energy. Because large price increases occurred during 1973 ー 1974 , this period provides a unique opportunity tO study the magnitude 0f the growth-inhibiting effects of energy. What should we expect to find? Because energy and c 叩 ital historically have been comple- ments, we should find that price increases would slow down capital formation. At the same time, the fact that energy and labor are substitutes would suggest that the use of labor should be rising, which, in turn, would cause the average productivity Of labor t0 fall. On a generallevel, the evidence is consistent with this set Of expectations. lnvestment is lower, and the average productivity of labor has fallen. Work by Jorgenson and others, such as Uri and Hassanein, confirms thiS impression. 8 Focusing on the period 1973 ー 1976 , a time characterized by rapidly increasing energy prices, Jorgenson first examined the question Of whether the decline in growth was due tO declines in input growth or tO declines in productiyity. He found that input declines were much less significant than declines in productivity. He then attempted tO discover the sources Of this productivity decline by looking at the specific experience Of 35 differ- ent industries. Though a decline in economywide productivity could conceivably be caused either by a shift in resources from high-productivity industries tO low-productivity industries or by a decline in productivity within each industry, Jorgenson found the latter tO be far more important than the former. His analysis 0f the causes 0f these declines revealed that, in 29 0f the 35 sec- tors examined, technological change was biased toward the use 0f energy. This result suggests that from 1973 to 1976 , productivity growth resulting from technological progress declined as energy prices rose. One puzzle tO be explained by those whO believe energy prices have already played a sig- nificant role in productivity declines is hOW that could be SO when the energy cost share is SO small. Factors with small cost shares should, in general, have rather small effects on output. 7Anthony J. Barbera and Virginia D. McConnell, "The lmpact 0f Environmental Regulations on lndustry Productivity: Direct and lndirect Effects," 面レ rn 記砿 E れ h0 れ m 例 I ECO れ 0 襯 / イれロ ge 襯例ー 18 (January 1990 ) : 50 ー 65 ; wayne B. Gray, "The COSt 0f Regulation: OSHA, EPA' and the ProductivitY Slowdowm" 襯たロれ ECO れ 0 襯た R 77 (December 1987 ) : 998 ー 1006 ; Gregory B. Christiansen and R0bert H. Haveman' "The Contribution 0f Environmen- Regulations t0 the Slowdown in productivity Growth"' 面 m 記砿 E れ耘 0 れ襯例 I ECO れ 0 襯 / d ロれ e 襯 e 8 ( 1981 ) : 381 ー 390 ; and J. R. Norsworthy, Michael J. Harper, and Kent Kunze, "The Slowdown in ProductivitY Growth: Analysis 0f Some Contributing Factors," Br00 ん加の Papers 加 ECO れ 0 襯た c ″彑 ( 2 , 1979 ) : 387721. 8Dale W. Jorgenson, "Energy prices and productivity Growth," Sca れ市れⅵ面″ m 記砿 ECO れ 0 襯 ~ 83 ( 1981 ) : 165 ー 179 ; Noel D. Uri and Saad A. Hassanein, "Energy prices, Labour ProductivitY' and Causality: An Empirical Exam- ination," E れ 44 ECO れ 0 襯 / 4 (April 1982 ) : 98 ー 104.