Jack Pezzey's research interests

Last updated on 18 March 2016

The following was drafted mainly with prospective PhD students and post-docs in mind, so all the topics mentioned are ones I'd be willing to supervise a PhD student or post-doc on.  However, they should also be of general interest to potential co-authors.  I am unlikely to do much new research myself in any of these areas until I have finished a book called Sustainability Economics: Scarcity and Growth on a Finite Planet.

(1) Interaction between sustainable development, economic growth, and measurement of national income.

My output in this area has so far been either highly simplified, mathematical models of the sustainable (or unsustainable) development of a single economy; or broad reviews of such modelling efforts. Application to general policy debates about "sustainability" is often not easy, particularly as there are theoretical reasons why sustainability is very hard to measure in practice; see "One-sided sustainability tests..." on my website for my last theoretical work on this, and "Augmented sustainability measures..." and "Towards a more inclusive and precautionary indicator..." for my ventures into empirical work. The other relevant past papers in my CV are Pezzey (2004, Scand. J. Econ.), Pezzey (2004, Env. Devel. Econ.), Pezzey (2003, Econ. Lett.), Pezzey and Toman (2002, Int. Yearb. Env. Res. Econ.), Pezzey (1998), Pezzey and Withagen (1998), Pezzey (1997), Toman, Pezzey and Krautkraemer (1995), and Pezzey (1992 - Environmental Values and World Bank papers).  For two possible research topics, one on empirical modelling of limits to growth, the other on theoretically correct "sustainability prices" for nonrenewable resources, see here.

(a) The topic I'd most like to address in this area is the sustainability of non-renewable resource extraction in Australia.  I find it striking how little discussion there is, in universities, government or the media, about some key aspects of the China-led resources boom that is such a big cause of Australia's recent prosperity.  For how long will new mineral resources be discovered fast enough to replace the depletion caused by sharply rising rates of extraction?  What is the correct deduction that should be made from Australia's national income to allow for extractions and discoveries? Are the rents from mining being taxed in the best way, and does more tax revenue need to be spent on investment (and what kind?) rather than consumption?  I would be happy to join someone in seeking funding for a project in this area, for example starting from Common and Sanyal (1998, Ecol. Econ. Vol. 26).

(b) A very different topic in sustainability economics research that would interest me is the importance of "relativistic" effects on sustaining well-being (or happiness), building on work by Howarth (1996, Ecol. Econ. Vol 16;  2006, Ecol. Econ. Vol 58) in particular, and by "happiness economics" in general. Much of people's well-being depends on their relative rather than absolute economic position in society, and relativistic effects are self-cancelling across society as a whole, so economic growth does not make people much happier on average. The risks caused by economic growth (for example, that climate change might prove catastrophic, or that the rate of technical progress might eventually not keep up with depletion of non-renewable resources) then seem less worth taking, and precautionary approaches should play a stronger role in environmental policy.

Many other research projects are possible, either applying known or new procedures for estimating "green NNP" or "genuine saving" to countries (particularly Asian ones) or sectors (such as minerals or water) where they have not been used much; or working on solutions to well-known general problems in green accounting. Two obvious general problems are (c) accounting for uncertain changes in world prices of traded natural resources; and (d) the way that irregular discoveries of non-renewable resources like ores disrupt any orderly, year-by-year calculation of the value of natural resource depletion. (Both are important problems for Australia, and are connected to topic (a).) Could the second problem be treated statistically by dealing with the expected rate of discoveries, rather than the actual discoveries?  Any theoretical work in these fields usually needs a high level of mathematical competence, but this is much less true for empirical work, where the challenge often lies more in data gathering.

 (2) Political and informational economy of using taxes, tradeable permits or property rights to conserve natural resources efficiently; applications to specific resource uses, especially greenhouse gas emissions.

For a long time this has been my main policy research interest, stimulated by observing over many years of how textbook ideas, of using market mechanisms (Pigovian pollution taxes and tradeable pollution rights) to manage environmental resources, so often fail to be adopted by policymakers. Some of my work has been to analyse the general political and information costs which explain this failure: see Pezzey (2003, Env. Res. Econ.), Pezzey and Park (1998), Pezzey (1992, Can. J. Econ) and Pezzey (1988). The rest has been on the application of my ideas to specific resources, mainly energy - see Pezzey (1992, Energy J.), Hanley et al (1992) and Pezzey (1991), and also the latter parts of Pezzey and Park (1998) and Pezzey (1988) - and more recently climate policy and CO2 emissions, in Jotzo and Pezzey (2007), Pezzey, Jotzo and Quiggin (2008), Pezzey, Mazouz and Jotzo (2010), Stern, Pezzey and Lambie (2012) and Pezzey and Jotzo (2012). The central problem that interests me is whether and how one can overcome the barriers to achieving the efficiency benefits of market mechanisms. The three main aspects of this problem seem to be (i) the information costs of establishing markets where none naturally exist (which can perhaps be lowered, but often prove an insuperable barrier); (ii) the political resistance from existing resource users to the increases in resource prices resulting from a market mechanism (which can perhaps be overcome by lump sum payments, such as distributions of free resource rights, though how to do this can be enormously contentious); and (iii) the broader political resistance to allowing the wealthy and powerful to "pay to pollute", which seems to have played a powerful role in much opposition to the wider market mechanisms, such as unlimited trading of greenhouse gas permits under the Kyoto Protocol.  I will always be willing to supervise research here, but beyond publishing existing draft papers, I expect not to be actively researching in this field for some while to come, because of my work on topic (3) below.

An example of applied research in this area is how best to control net emissions of greenhouse gases from developing countries, given the high uncertainty of such countries' future development and emission pathways.  This was the research topic studied during 2002-5 by my then PhD student, now co-author in the Crawford School, Frank Jotzo.

As far as fossil-fuel CO2 emissions are concerned, the work tends to be mostly "economic", because mainstream macroeconomic questions such as trade and public finance are unavoidable, and not very "environmental", because CO2 is globally diffused, and hard to abate and thus easy to measure from carbon inputs.

There are many other interesting, possible applications of market mechanisms of environmental management that I might be willing to supervise.  One worth a special mention is forest management, such as hidden subsidies for old-growth logging. My specialist knowledge here is slight, but my scientific colleagues in Fenner School, especially David Lindenmayer, have a wealth of knowledge. A great attraction of studying in Fenner School is being able to tap this knowledge, and thus ensure that your research is based on leading-edge science, not just on what economists like me have picked up from lay reading.

(3) Developing variants of William Nordhaus's Dynamic Integrated Climate-Economy (DICE) model

Through my teaching a climate-change economics topic within my full-semester graduate course IDEC8004, Sustainability and Ecological Economics during 2006-11 (ask me for the password if you want access to files on this site), I became very interested in the detailed assumptions comprising the DICE model, because its results for the time profiles of carbon emissions cuts and prices seem so complacent compared to recent scientific warnings about urgent needs for deep cuts. It is fairly easy to download Nordhaus's program in either GAMS or Excel form, change his assumptions, and see what difference it makes to the time profile of carbon emissions abatement and prices, and I did just this in my "Towards a more inclusive and precautionary indicator..." paper.  I have a number of ideas about climate science, discounting and depreciation here, many of which would make good topics for PhD research because there is a clear framework to depart from and results can be rapidly computed.

(4) Critiques of economic assumptions about people's preferences, and substitutability and technical progress in production processes. Biological and cultural evolution of Western environmental values.

This is my "blue sky", but much-neglected, area of interest. I have many ideas, many set out in Pezzey (1992, Env. Values). Idea (1)(b) above is in essence "blue sky" because I have only one, very old draft paper in the area, and two further ideas particularly interest me:

(a) To what extent can physical measures of sustainability be used to explore the limits to substitutability which are blithely assumed away by the mathematical functions typically used in economic modelling, such as Cobb-Douglas production functions?  Through my teaching of IDEC8004 (see (3)), I learnt more about physical measures such as ecological footprints, energy analysis, and materials input per unity of service.  Each of these uses a different measure of environmental impact: area, energy and mass respectively.  Given how little economic work has been done, and maybe can be done on the long-term limits to substitutability, can physical measures such as these give some useful early warnings of future unsustainability?

(b) Can one use 2-dimensional, agent-based modelling to study how a society's behaviour towards the natural environment evolves in competition with neighbouring societies? For example, how much have expansionary or exploitative attitudes towards the environment been selected for in the evolution of Western industrialism, and how deeply embedded are they in our culture, or even our genes?

Both (a) and (b) are research areas that I'm always meaning to work on but never get round to.  There's much fascinating research to do, but it needs study across a wide range of disciplines, and to some extent an interest in knowledge for knowledge's sake.

 

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