Economics in the RMA

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Economics in the RMA

• Presentation by Phil Donnelly

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True or False?

• Resource management can be seen as a subset of
  economics.
• Marlborough Ridge v Marlborough DC

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What is economics about?

• Economics is a social science
• Concerned with efficient allocation of societys
  scarce resources
• To optimize economic well-being
• A rational way of thinking
• Lack of understanding
• Business and making money/profit
• Challenge to ideological and philosophical values

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Why is efficiency important to society?

• Resources are scarce relative to needs
• Determines quantum of private goods
• Food, houses, cars, travel
• The amount of publicly funded goods
• Hospitals, Schools, Social services
• Economic efficiency/wellbeing same concept

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Money - common denominator for assessments

• values enables efficiency assessments
• Prefer to measure utility or satisfaction
• Cant make interpersonal comparisons
• Cant comment on different distribution of wealth
  and resources

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Economic definition of efficiency

• Pareto optimum allocation
• Cant make one person better off/without making
  others worse off
• Kaldor Hicks compensation test
• Winners compensate losers net gain
• Non problematic
• Three components - productive, allocative dynamic

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Three Branches To Economics

• Positive Economics
• Describes peoples behaviour when needs exceed
  available resources
• General agreement amongst economists
• Normative Economics
• Judgments - how society ought to be
• CBA practical arm
• Weak value judgments
• Dont impose own values
• Individuals are welfare maximizing units
• Principle of consumer sovereignty -Consumer is
  King

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Third Branch of economics

• B/S
• Capturing the media
• Making weather forecasters look good

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Is The RMA An Economic Act?

• RMA
• Part 84 economic reforms
• Need for created by scarcity, need to use,
  adverse effects
• Adverse effects undermine sustainable management

• Economics
• Driver of 84 reforms
• Need for study created by scarcity, need, adverse
  effects
• Externalities undermine efficiency

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Rationale For Government Intervention

• Economics
• Markets not perfect and misallocate resources
• Undermines societys well-being
• Externalities major cause of misallocation
• Intervention that improves efficiency justified

• RMA
• Modelled on economic rationale
• Adverse effects undermine sustainable management
• Intervention that promotes sustainable management
  is justified

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Causes of Environmental Externalities/Adverse
Effects

• RMA
• Not having regard to future generations
  foreseeable needs
• Not safeguarding life supporting capacity
• Not avoiding, remedying, mitigating adverse
  effects

• Economics
• Excessive depletion natural resources - imposes
  opportunity cost on society
• Market Absence - environmental goods
• External Effects - third parties

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Marlborough Ridge vMarlborough District Council

• there is a distinct thread in the RMA which
  takes an economic approach to sustainable
  management of natural and physical resources,
  and in fact our isolation of the economic jargon
  in the RMA may lead to incorrect confinement of
  economic issues and principles and
  misunderstanding of their relevance to the RMA.

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RMA Sections Noted by Court

• s.5(2) reference to enabling and economic
  wellbeing
• s.7(b) reference to efficient use
• s.9 where the default option is that activities
  are allowed as of right unless a rule in a plan
  states otherwise
• s.32 (1)(b) benefits and costs
• s.32(1)(c)(ii) effectiveness and efficiency

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Sections Not Mentioned by Court

• s.5(2)(a-c) - parallels to economic concepts of
  environmental market failure
• S.32 structure
• Transferability water permits
• s.104(8) - not have regard to trade competition
• S.73(4) - not have regard to trade competition
• S.157 - Coastal Tendering

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What are the differences in approach?

• RMA
• Establish non-economic environmental bottom lines
  
• S.32 to determine comparative efficiency and
  effectiveness of options
• Balance assessment

• Economics
• Undertake CBA assessment of issue
• Use non market valuation techniques
• By analysis determine optimal environmental
  intervention

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Contribution of Economics To Date

• Most branches of Environment Court accept
  efficiency means economic efficiency
• Had regard to economic argument
• RMA has increased not reduced cost of use and
  development
• Misunderstanding of economic principles?

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How is Economics in the RMA Viewed by Courts

• Very Favourably and encouraged by some branches
• ?? by others

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THE END