Date(s): September 17, 2014, 1:30-3:00pm

Location: Room 4128, William Jefferson Clinton West Building, 1301 Constitution Ave., NW, Washingon, DC

Contact: Carl Pasurka, 202-566-2275

Presenter(s): Charles Sims (University of Tennessee and Howard H. Baker Jr. Center for Public Policy) David Finnoff (University of Wyoming), and Jason F. Shogren (University of Wyoming) Presenting: Charles Sims

Description: Debate surrounding the timing of risk reduction strategies for large scale ecological change persists because risks are difficult to predict, involve irreversibilities, and impact multiple jurisdictions. The combination of these three factors creates a general class of filterable spatial-dynamic externalities (FSDE), in which one person’s risk reduction investments reduce or filter undesirable events experienced by others and the value of information about the nature of the realized damages. By focusing on the optimal intervention decision, we illustrate how and when the opposing forces created by an FSDE will lead to a divergence in individual and collective risk reduction strategies. We use bioinvasions as our motivating example. The bioinvasion first hits one agent, and his risk reduction investments reduce the risk faced by all other neighbors. We find there is social value for asking the first agent to delay a risk reduction investment and “take a loss for the team.” By delaying responses to ecological change, the collective makes a more informed risk reduction investment. Efforts to internalize the full benefits of risk reduction investments may have unintended consequences on the responsiveness of environmental policy.

Seminar Category: Environmental Economics