Research Spotlight: The Economics of Environmental Problem-Solving

By Hilary Smith, Sustainability Resource Center

Economics might not seem, at first glance, an obvious choice for studying real-world environmental issues like air quality, climate change, and the costs and benefits of resource extraction. But U of U economics professor Eric Sjöberg would disagree.

U of U professor Eric Sjoberg uses economic tools to study real-world environmental issues.

U of U Economics Professor Eric Sjoberg

Sjöberg arrived at the U in 2013 from his native Sweden, and in his research he applies game theory—a logical and mathematical method for studying strategic decision making—to issues like the development and enforcement of environmental regulations.

In essence, game theory asks the question, what would one person (or state, company, or other entity) likely do in response to another person’s or entity’s behavior in a given situation? How do things like accurate market information, side payments, repeated interactions, and group memberships change these behaviors? And what are the likely outcomes, based on everyone’s best-interest choices?

Last year, in an article in the journal Polar Research, Sjöberg and several coauthors described the use of game theory in studying environmental issues in the Arctic. Game theory, they assert, is a well-adapted method—though not the only method—for studying behaviors related to environmental issues. The method is particularly fitting, they say, because it accounts for the needs and preferences of multiple stakeholders coming from a variety of backgrounds and disciplines, and because environmental issues usually affect large numbers and groups of people. Game theory can both explain the causes, and suggest possible solutions for issues like the “tragedy of the commons,” which states that individuals will often over-use a resource that is common and unregulated to the point that the resource is damaged, reduced, or exhausted. Such ‘tragedies’ have occurred, for instance, in the fishing industry, where each fisherman will often try to maximize his or her own catch, without accounting for an overall plummet in fish populations. Game theory has suggested, however, that overfishing can be reduced through various interventions—licensing, restricting catch numbers, taxing the catch, or providing better information about the current status of fish populations. In other words, by changing the game.

This cartoon by Yoran Bauman, the "Standup Economist," explains the principles behind the tragedy of the commons. Image: Flickr.

This cartoon, by Yoran Bauman, the “Standup Economist,” explains some of the principles behind the tragedy of the commons.
Image: Flickr.

Sjöberg has been particularly interested in the game-changing effect of information on behaviors, policy decisions, and other outcomes. While most of his research results are interpreted in the form of economic (i.e., dollar value) costs of certain events or behaviors, he realizes that the very act of quantifying these costs might change the way stakeholders behave—in ways that might not be desirable.

oilblm

Photo: BLM.gov

Take resource extraction as an example. A company looking to drill an oil well can usually, fairly easily, quantify the financial benefits of drilling—like profits, jobs, and payments to the community. It is harder, perhaps, to quantify the negatives—like pollution, destruction of habitat, danger to local commuters from increased traffic, disruption of quietude and viewshed, and damage to archaeological artifacts. All of these are real, significant impacts, for which someone—likely, everyone—will pay the price. Sjöberg wonders how all parties would behave if they knew the “price” of these negatives—would opponents push harder against drilling, for instance, or would the resource extractors win, knowing that factors once thought to be ‘priceless’ could suddenly be bought?

Another of Sjöberg’s research projects focuses on cooperation and conflict in environmental management. He is examining how climate factors like drought, precipitation, river flow, and flooding affect conflict and cooperation between stakeholders sharing freshwater resources—that is, states, nations, and municipalities with lakes, rivers, or other bodies of water crossing their borders.

One of Sjoberg's research projects analyzes inter-border responses to climate-related water events, like flood and drought. Photo: www.e-education.psu.edu

One of Sjoberg’s research projects analyzes inter-border responses to climate-related water events, like flood and drought.
Photo: http://www.e-education.psu.edu

This research, which is in its early stages, matches a data set of climate-related water events on trans-boundary bodies of water from 1940 to 2008 to newspaper articles describing local responses to these water events. Researchers analyze the newspaper articles to determine if responses were cooperative—like shared aid, joint water containment projects, treaties, or other friendly gestures—or conflict-based, like hostile statements or military action. Understanding these reactions, Sjöberg explains, might help us better understand how society might react more broadly, as climate change likely brings more extreme weather events that occur across political and geographic boundaries.

One of Sjöberg’s newest projects, started last year by economics graduate student Derek Hackman, attempts to quantify

View of pollution trapped in a winter inversion, looking back at the city from Little Cottonwood Canyon. Photo: Laura Schmidt

View of air pollution trapped in a winter inversion, looking back at the city from Little Cottonwood Canyon. Photo: Laura Schmidt

the linkage between air pollution and various pregnancy outcomes, from gestational age to risk of pre-term births. Hackman and Sjöberg have been exploring the impact of PM 2.5 (particulate matter smaller than 2.5 micrometers in diameter, which can cause bodily harm when inhaled) concentration on these pregnancy outcomes, taking into account various intensities and durations of pollution exposure. This project aims to quantify a causal link that has already been suggested by previous research. In the future, Sjöberg says he would like to try to quantify the costs of other negative effects of air pollution as well, from loss of new business to the area, to impacts on wages and children’s school performance.

In all his research, Sjöberg believes in incorporating transdisciplinary perspectives, matching the multifaceted nature of the ecological problems he’s studying with an equally multifaceted research approach. Each discipline comes with its own sets of assumptions, and he notes that it sometimes takes an outside view to illuminate what those are. As a bonus, he says he deeply enjoys opportunities to meet and work with people from different fields of study.

Research Spotlight is an occasional series on SustainableUtah. Do you know a faculty member or student currently performing sustainability-related research related to sustainability? Send story suggestions to hilary.smith@utah.edu.

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