Restoring Natural Resources with Destination-Driven Costs

Posted: 4 Sep 1998

See all articles by Carl V. Phillips

Carl V. Phillips

Epiphi Consulting Group; University of Texas at Houston; Center for Philosophy, Health, and Policy Sciences

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Abstract

Economics typically assumes that injured natural resources are restored along a fixed path of increasing marginal costs. By contrast, many restoration efforts -- such as cleaning a contaminated aquifer or replacing the sand on an oil-tarnished beach -- are characterized by destination-driven costs, which depend mainly on final quality, not the pre-restoration quality. Given the resulting non-convexities in cost, the optimal level of restoration may be a discontinuous and non-monotonic function of post-injury quality. Regulatory rules should reflect these patterns, as should liability rules, since restoration plans and costs determine the expected cost of putting a resource at risk.

JEL Classification: Q20, K13, D62

Suggested Citation

Phillips, Carl V. and Zeckhauser, Richard J., Restoring Natural Resources with Destination-Driven Costs. Available at SSRN: https://ssrn.com/abstract=121259

Carl V. Phillips (Contact Author)

Epiphi Consulting Group ( email )

HOME PAGE: www.epiphi.com

University of Texas at Houston

Houston, TX 77030

Center for Philosophy, Health, and Policy Sciences

HOME PAGE: www.cphps.org

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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617-496-3783 (Fax)

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