Abstract: Policy and entrepreneurial communities are increasingly promoting innovation by using prizes but their distinguishing features remain inadequately understood. Models of patents treat winning a patent as winning a prize; other models distinguish prizes primarily as public lump-sum (re)purchase of a patent. We examine advantages of prizes based on the ability to customize rewards, manage competition, generate publicity, and cover achievements otherwise not patentable. We compare prizes to patents using a model based first on whether the procuring party knows its needs and technology, its needs but not its technology, or neither. The second factor is the risk that the investment in research will prove profitable, where the greater the risk, the more the procuring party should share in it through ex ante cost coverage or payment commitment. The model suggests a framework that may be extended to cover other means of technology inducement, including grants, customized procurement, and off-the-shelf purchase.

Abstract: The Deepwater Horizon oil spill in the Gulf of Mexico in April 2010 led to the deaths of 11 workers, a six-month moratorium on deepwater drilling in the Gulf, and nearly three months of massive engineering and logistics efforts to stop the spill. The series of failures before the well was finally capped and the spill contained revealed an inability to deal effectively with a well in deepwater and ultradeepwater. Ensuring that containment capabilities are adequate for drilling operations at these depths is therefore a salient challenge for government and industry. In this paper we assess the Marine Well Containment Company (MWCC), a consortium aimed at designing and building a system capable ofcontaining future deepwater spills in the Gulf. We also consider alternatives for long-term readiness for deepwater spill containment. We focus on the roles of liability and regulation as determinants of readiness and the adequacy of incentives for technological innovation in oil spill containment technology to keep pace with advances in deepwater drilling capability. Liability and regulation can significantly influence the strength of these incentives. In addition, we discuss appropriate governance structure as a major determinant of the effectiveness of MWCC.

Abstract: We extend the theory of quality-adjusted expenditure indices to estimate benefits from public investment. In particular, we model the selection of new instruments (in the form of remote-sensing devices) to enhance the longest-operating U.S. satellite-based land-observing program, Landsat. We then apply the model to the use of Landsat in measuring global forest carbon sequestration. Improving measurement of the role of forests in storing carbon has become a prominent concern in climate policy. By characterizing the value of Landsat data in forest measurement, the expenditure function allows us tohelp inform public investment decisions in the satellite system. The expenditure function also makes explicit the sensitivity of the selection of instruments for the satellites to the value of Landsat information, thus linking instrument choice explicitly to policy design.

Abstract: We demonstrate the diffusion in use of Earth observations data in social science research. Our study is motivated by the continuing debate among policymakers over the value of the nation’s investment in Earth observations. We also consider the role of related factors including the spread of geographical information systems (GIS; a complementary tool for using Earth observations data) and the role of data prices. We first estimate a diffusion curve and then draw from standard bibliometric methods to evaluate further the extent to which the research field is growing. We realize that these aspects of the value of Earth observations are often part of policy debate, but we offer insights into how to substantiate and document these claims. We find evidence of increasingly widespread use of Earth observations in an ever-widening number of applications and geographic regions. GIS and data prices influence this diffusion. However, we see less evidence of a community of practice within the large social scienceliterature represented in our data. These findings have implications for steps to take to increase the benefits of Earth observations.

Abstract: Using rockets to launch communications satellites and other spacecraft poses risks to the uninvolved public, including persons and property under the flight path of the launch vehicle. The federalgovernment plays a pivotal technical role during the actual launch by carrying out certain risk-related procedures, thus causing third-party risk to be jointly produced by the company and the government. In addition, under the Commercial Space Launch Act, the government partially indemnifies commercial launch companies for third-party damages. We compare the indemnification policy to optimal liabilityrules under public-private co-production of risk. Under modest assumptions, shared liability created by the indemnification rules decreases the incentive of both parties to take care relative to the optimum. If care were observable, it would be preferable for the government to fully indemnify companies that take due care. The role of the government as an agent for third parties may qualify these findings.

Abstract: Beginning in the early 1990s, stricter government regulation to protect public health and the environment led to radical changes in waste technology and management in the United States. More stringent regulation induced wholly new technologies, including the lining of landfills, the control of their gas emissions, and changes in the economic scale and geographic location of operation. Economic integration of waste management transformed “the local dump” into a nationwide and modernized industry. These changes led to unprecedented intervention by local government in attempts to control price, quantity, and location-specific attributes of the $40 billion waste market. Regulatory-induced changes in markets have long been a topic of academic and policy interest, but unique in this case was the emergence of legal challenges—under the dormant commerce clause—concerning public governance and the private sector. This paper reviews the regulation-induced changes in the market, its subnational governmental interventions, and protection of interstate commerce when new technology restructures a local service into a national business.

Abstract: This paper surveys and describes the peer-reviewed social science literature in which data from the U.S. land remote sensing program, Landsat, inform public policy in managing natural resources and the environment. The Landsat program has provided the longest collection of observations of Earth from the vantage point of space. The paper differentiates two classes of research: methodology exploring how to use the data (for example, designing and testing algorithms or verifying the accuracy of the data) and applications of data to decisionmaking or policy implementation in managing land, air quality, water, and other natural and environmental resources. Selection of the studies uses social science-oriented bibliographic search indices and expands results of previous surveys that target only researchers specializing in remote sensing or photogrammetry. The usefulness of Landsat as a basis for informing public investment in the Landsat program will be underestimated if this body of research goes unrecognized

Abstract: Governments investing in long-lead technology development programs face considerable uncertainty as to whether the investment eventually will “pay off” for the taxpayer. This paper offers a framework to inform long-lead technology investment. We extend the theory of quality-adjusted cost indices to develop a conceptually rigorous, but data parsimonious, means of estimating consumer benefits from a new technology. We apply this model to a possible future electricity generation technology, space solar power (SSP). The United States, Japan, and other governments have begun investing in SSP but lack the benefit of a relevant economic context for informed decisions. We frame and analyze the economic relationship between SSP and competing electricity generation technologies with respect to direct costs, environmental externalities, and reliability. We also explicitly incorporate uncertainty and consider differences in the resource endowments available to electricity markets by considering four distinct world geographic regions.

Abstract: At the request of managers at the National Aeronautics and Space Administration, this paper describes frameworks for and illustrates societal benefits associated with Earth observations from an experimental satellite known as the Multiangle Imaging SpectroRadiometer (MISR). MISR is a unique camera that images Earth’s atmosphere and other characteristics simultaneously from nine angles. This multiangle perspective enhances our ability to measure and monitor dimensions of climate, weather, air quality, natural hazards, and the biosphere. “Societal benefit” in this paper generally refers to practical applications of data and data products beyond their intrinsic science merit. The paper has two objectives: to demonstrate how several societal benefit frameworks work, and to highlight some of these benefits in the case of MISR. Such consideration of practical benefits is timely, as their realization is becoming a prominent objective of future space remote sensing activities. At least four groups of experts recommend that societal benefit serve as a heavily weighted criterion for prioritizing Earth science research opportunities. The National Academy of Sciences’ forthcoming decadal survey for U.S. Earth science applications from space, the U.S. Climate Change Research Program, the framework for the international Global Earth Observing System of Systems (GEOSS), and the new world water program of the World Meteorological Organization (WMO) all argue that societal benefit should be a determining factor in selecting the next Earth-observing spacecraft missions and instruments. If these recommendations are implemented, the frameworks and illustrations below may prove useful in guiding benefit descriptions in future space-derived Earth observation programs.

Abstract: The lay of the policy land for addressing and managing environmental risk includes the hillock of the precautionary principle, the mountain of the practice and ethics of monetary valuation, and the tectonic plates of real-world innovations in markets and trading exchanges for nonmarketed environmental goods. This paper offers an overview of these contemporary and as yet unresolved issues and asks how each might be addressed in disparate environmental risks such as lightning, climate change, and severe weather. The overview focuses on issues that may be of interest to the American Meteorological Society’s annual policy colloquium.

Abstract: This paper traces the evolution of space-derived remote sensing data and data products from their initial dissemination to their impact on public policy related to climate change. We focus on the examples of renewable energy, public health, and ecosystem assessment. Our approach differs from previous studies that have characterized the value of data in terms of the fundamental scientific phenomena they describe. In our research we have sought to identify contributions of space-derived earth science in “making a difference” beyond scientific understanding, thereby providing at least a partial answer to questions about the utility of research posed by Congress, the Office of Management and Budget, managers at the National Aeronautics and Space Administration, and other decisionmakers.

Abstract: This study, prepared at the request of the Office of Earth Science at the U.S. National Aeronautics and Space Administration (NASA), describes a general framework for conceptualizing the value of information and illustrates how the framework might be used to value information from earth science data collected from space. The framework serves two purposes. One purpose is provision of a common basis by which to conduct and evaluate studies of the value of earth science information that serves a variety of uses, from improving environmental quality to protecting public health and safety. The second purpose is to better inform decisionmakers about the value of data and information. Decisionmakers comprise three communities: consumers and producers of information, public officials whose job is to fund productive investment in data acquisition and information development (including sensors and other hardware, algorithm design and software tools, and a trained labor force), and the public at large.

Abstract: In 1994 one of the most radical institutional restructurings in the U.S. government’s provision of critical weather information took place after eight unsuccessful attempts. A presidential decision directive merged weather data collection by satellites operated by the Department of Defense for military operations and satellites operated by the Department of Commerce for civilian weather forecasting. Such radical restructuring involving government agencies with different objectives, economic constraints, and operating cultures is rare. This paper reviews the decision that led to “convergence,” discusses economic arguments advanced for the merger, and finds that the problem of an incomplete contract, from the perspective of contract theory, is the fundamental challenge confronting the new structure. The paper also discusses the implications of the new organizational structure for incentives to engage in research and development in pushing the frontier of space technology, and the increasingly large role played by satellites in collecting not only weather but also climate-related data.

Abstract: We develop and estimate an index-based measure of expected consumer welfare under various carbon emissions control policies in the electricity generation sector. This approach estimates welfare effects by a somewhat less data intensive methodology than econometric approaches or more complex modeling. We include anticipated technological change in the production of renewable and nonrenewable power generation during the next two decades. We estimate welfare improvements from 2000 to 2020 as renewable energy technologies continue to be improved and gradually adopted, compared with a counterfactual scenario allowing for continual improvement of nonrenewable generation technology. We formally incorporate uncertainty. We evaluate the model under alternative carbon emissions control policies, including policies that create incentives through price mechanisms and policies that mandate the composition of the generation portfolio. We focus on three countries that differ widely in their power fuel mix: India, Germany, and the United States.

Abstract: We study determinants of market organization of local public services by an empiricalexamination of one of the most visible municipal services, residential waste management. Usinga multinomial logit model and data for 1,000 U.S. communities, we explore the effect of politicalinfluence, voter ideology, environmental constraints, production costs (i.e., “economies ofdensity”), and contracting transaction costs on a community’s choice of market arrangement forwaste collection and recycling. We find that cost factors are a significant determinant of servicedelivery method. In contrast, few of the political variables are statistically significant. Theseresults hold for our models of both waste and recycling, lending further evidence to theconclusion that local governments emphasize costs when choosing between private and publicprovision.

Abstract:

In this paper we develop a cost index–based measure of the expected consumer welfare gains from innovation in electricity generation technologies. To illustrate our approach, we estimate how much better off consumers would be from 2000 to 2020 as renewable energy technologies continue to be improved and gradually adopted, compared with a counterfactual scenario that allows for continual improvement of conventional technology. We proceed from the position that the role and prospects of renewable energy are best assessed within a market setting that considers competing energy technologies and sources. We evaluate five renewable energy technologies used to generate electricity: solar photovoltaics, solar thermal, geothermal, wind, and biomass. For each, we assume an accelerated adoption rate due to technological advances, and we evaluate the benefits against a baseline technology, combined-cycle gas turbine, which experts cite as the conventional technology most likely to be installed as incremental capacity over the next decade. We evaluate benefits against both the conventional combined-cycle gas turbine prevalent at this time and a more advanced combined-cycle gas turbine expected to be employed during the coming decade. We estimate the model for two geographic regions of the nation for which renewable energy is, or can be expected to be, a somewhat sizable portion of the electricity market—California and the north central United States.

In present-value terms we find that median consumer welfare gains over 20 years vary markedly among the renewable technologies, ranging from large negative values (welfare losses) to large positive values (welfare gains). The effect of uncertainty can lead to estimates that are 20% to 40% larger or smaller than median predicted values. Our results suggest that portfolios that give equal weight to the use of each generation technology are likely to lead to consumer losses in our regions, regardless of the role of the externalities that we consider. However, when the portfolio is more heavily weighted toward certain renewables, consumer gains can be positive.

Abstract: We develop a conceptual model of the economic value of space solar power (SSP) as a source of power to in-space activities, such as spacecraft and space stations. We offer several estimates of the value based on interviews and published data, discuss technological innovations that may compete with or be complementary to SSP, and consider alternative institutional arrangements for government and the private sector to provide SSP.

Abstract:

Managing the growing quantity of used electronic equipment poses challenges for waste management officials. In this paper, we focus on a large component of the electronic waste stream—computer monitors—and the disposal concerns associated with the lead embodied in cathode ray tubes (CRTs) used in most monitors. We develop a policy simulation model of consumers’ disposal options based on the costs of these options and their associated environmental impacts.

For the stock of monitors disposed of in the United States in 1998, our preliminary findings suggest that bans on some disposal options would increase disposal costs from about $1 per monitor to between $3 and $20 per monitor. Policies to promote a modest amount of recycling of monitor parts, including lead, can be less expensive. In both cases, the costs of the policies exceed the value of the avoided health effects of CRT disposal.

Abstract: Satellite solar power (SSP) has been suggested as an alternative to terrestrial energy resources for electricity generation. In this study, we consider the market for electricity from the present to 2020, roughly the year when many experts expect SSP to be technically achievable. We identify several key challenges for SSP in competing with conventional electricity generation in developed and developing countries, discuss the role of market and economic analysis as technical development of SSP continues during the coming years, and suggest future research directions to improve understanding of the potential economic viability of SSP.

Abstract: We develop a quality-adjusted cost index to estimate expected returns to investments in new technologies. The index addresses the problem of measuring social benefits from innovations in service sector inputs, where real output is not directly observable. We forecast welfare gains from two U.S. Advanced Technology Program innovations equaling 25%-50% of expected price, and aggregate consumer benefits of $1-$2 billion, relative to trends in existing technologies. Our model’s probabilistic parameters reflect uncertainty about prospective outcomes and in our hedonic estimates of shadow values for selected product attributes. The index can be readily adopted by research and development (R&D) managers in industry and government.

Abstract:

This paper describes a model for estimating, in a probabilistic framework, expected future consumer surplus from planned new product innovations. The model has been applied to estimations of taxpayer benefits from NASA's New Millenium Program (NMP), which develops new technologies for space science, and to the digital data storage technologies being supported by the Department of Commerce's Advanced Technology Program (ATP). The model uses cost index methods based on consumers' estimated marginal valuation for quality improvements in the technology. Probabilistic values for performance increases are taken from the innovators' own expectations. The analysis reveals the sensitivity of welfare increases to these values, which are assumed to be biased upward. The cost index, when combined with an expected rate of adoption, estimates consumer benefits from the innovation, gross of its research and development costs. Benefits are estimated net of a dynamic baseline defined by the best available substitute technology, which is also assumed to improve over time. Findings are therefore expressed in terms of the economic value of the innovation to consumers, compared to advances that might occur in the absence of the NMP or ATP investments.

Illustrative results—estimated cost indices and 95% confidence bounds—are presented for technologies that are expected to improve consumer welfare and for those that, on a quality-adjusted cost basis, are likely to be outperformed by the selected baseline technology.

Abstract: We review economic models of environmental protection and regulatory enforcement to highlight several attributes that are particularly likely to benefit from new enforcement technologies such as remote sensing using satellites in space. These attributes include the quantity and quality of information supplied by the new technologies; the accessibility of the information to regulators, regulatees, and third parties; the cost of the information; and whether the process of information collection can be concealed from the observer. Satellite remote sensing is likely to influence all of these attributes and in general, improve the efficacy of enforcement.

Abstract: We examine determinants of the nearly 30 percent increase in the average age of domestically produced, registered automobiles since the mid-1960s. We find that very little of the increase in car longevity is attributable to improvements in the inherent durability of cars. Rather, we find that the temporal pattern of longevity improvement is highly correlated with the level of market concentration in the auto industry. In particular, we argue that the arrival of competition in the industry led to an increase in longevity largely by forcing a reduction in the price of auto maintenance and repair, which in turn induced consumers to maintain their cars into older age.

Abstract: Contentious debate surrounds allocation of the geostationary orbit and electromagnetic spectrum, two resources used by communications satellites. An extensive economics literature alleges that the nonmarket administrative allocative procedures now in place are highly inefficient, but no research has empirically estimated the welfare loss. This paper develops a conceptual framework and a computerized model to estimate the economic value of the resources, the size and distribution of welfare costs associated with the present regulatory regime, and the potential gains from more market-like allocation.

Abstract:

The growing trend in interstate shipments of municipal solid waste is a topic of substantial public debate, including numerous Supreme Court decisions concerning waste shipments in the context of the Interstate Commerce Clause and recent Congressional proposals to exempt waste from jurisdiction of that clause. To date, however, very little is known about the effects such proposals might have on the interstate waste market. If interstate waste shipments are restricted, what is the likely economic effect on the public? Are the effects likely to be borne by the producers of waste disposal facilities, or by consumers? Are the effects likely to differ among regions of the country, such that some are better off and others are worse off?

Our research models the interstate market for municipal solid waste and evaluates the potential economic effects of public policies proposed to restrict waste flows. To our knowledge, this research is the first to quantitatively evaluate these proposals. We develop a computerized version of economic models of the use over time of spatially differentiated resources — characteristics which well describe the nation's waste disposal facilities. The model provides quantitative estimates of the aggregate social surplus which potentially can be generated by the solid waste industry, and involves calculation of how the capacities of landfills located in different states in the United States should be used over time and which population centers these landfills should serve. We then use the model to calculate how much aggregate surplus would change by the imposition of a variety of non-technological constraints, such as flow controls permitted by the Congress. In addition, we quantify the distribution of these changes in surplus across geographic regions and between producers and consumers of disposal services.

We focus on two regions of the United States, the northeast and midwest. These regions account for about 80% of interstate trade by volume, and involve sufficiently large volumes of transshipments to be subject to recent Congressional proposals for trade restrictions (the proposals generally target large shipments). We also focus on waste that is landfilled, as this is the disposal method for most interstate waste. However, an important input in our model is the cost of alternative disposal methods.

The model we present is rich in detail and flexibly permits a wide variety of policy simulations. Because the effects of policies can be difficult to predict on producers and consumers, across geographic regions, and in the long-run as well as the short-run, these simulations can shed light on understanding numerous implications of various proposals. For example, one of the most important of our results is that restricting the volume of waste that one state may ship to any other state, as recent Congressional bills propose, can actually lead to an increase in the number of interstate shipments as states export smaller volumes to even more states in order to meet limits on the size of shipments to any one state. We also find that policies to restrict interstate waste shipments through import surcharges or volume-based restrictions reduce economic welfare, although some landfill owners in some regions of the country may benefit. Our model generates a lower bound on the magnitude of the reduction in economic welfare from these types of policies; it is about $4 per person per year, although in some regions of the country, the per capita net loss is $30 to $40 per year.

We have organized our report as follows. First, we briefly review proposed legislative developments to restrict interstate shipments of waste and the arguments underlying the debate over them. We then describe our model of interstate waste trade, including key assumptions and the data we use to parameterize the model. After describing our model and data, we analyze four policies: surcharges on imported waste, restrictions on the volume of waste exports, a combination of surcharges and volume restrictions, and an outright prohibition of interstate shipments. We then estimate the effects of each of these restrictions on the interstate waste market, including the extra costs of waste disposal, which geographic regions are most likely to bear them, and whether the costs fall on producers, consumers, or both.

Important caveats about our research involve key assumptions we make and limitations of the publicly available data we use to calibrate our model. We realize that waste trade restrictions may confer benefits as well as impose costs; for example, communities may feel better off when waste imported into their locales is reduced. Although we do not take these benefits into account in our research, our results can serve as benchmarks of the costs against which to measure these benefits. Among our most important assumptions are two that are required to make the model computationally feasible. These assumptions are that waste generation originates, and that disposal facilities are located, in one or at most two locations within a state, and that generation and disposal are co-located (within the same major city) in a state. As we could expect, these assumptions cause our model to underestimate some waste transshipments, particularly small volume shipments. We discuss these and other implications of our assumptions in detail.

The data that we use to calibrate our model are publicly available data on waste generation, waste disposal and transportation costs, estimated demand elasticities for waste generation, and other information. The data are quite limited for several, widely recognized reasons. For example, only recently have some states begun collection of statistics about waste generation, disposal, exports and imports, and data are generally not consistently categorized across states, limiting inter-state comparability. In addition, reported volumes of imports and exports typically do not match between any pair of states (a similar problem arises in international trade statistics on imports and exports).

Despite these assumptions and limitations, we have confidence in the results of our model for several reasons. Our baseline model performs remarkably well in approximating some of the more "credible" "real world" data. For example, it generates estimated average landfill tipping fees and an aggregate volume of interstate shipments that closely approximate the available data. In addition, the pattern of trading partners and the relative volumes of waste traded among partners is consistent with available information.

Abstract:

Environmentalists, the Congress and other decisionmakers, waste managers, and the public articulate a host of objectives in managing solid waste. These objectives include: decreasing undesirable environmental and health effects associated with solid waste landfills and incinerators; conserving energy and virgin material resources; offsetting existing government policies that promote virgin material use; reducing greenhouse gas emissions; increasing the demand for secondary materials to help local communities sell the recyclables they collect; meeting state and local recycling goals; and decreasing undesirable environmental and health effects associated not only with waste disposal but with the entire "life-cycle" of all products.

This list represents an amalgam of underlying concerns about safeguarding the environment, natural resources, and human health; it also includes some objectives which are not necessarily ends in themselves (such as offsetting virgin materials use or meeting recycling goals—presumably, these goals are means by which to protect the environment and health). In this paper, we evaluate these various goals from an economic efficiency standpoint and assess the ability of different solid waste and recycling policies to achieve these goals.

We conclude that the most important problem that solid waste and recycling policies can address is the problem of zero pricing for residential solid waste collection and disposal that exists in most communities in the United States. Zero prices lead to more disposal than is socially optimal. The most efficient policy for addressing the problem, absent illegal disposal opportunities, is pricing trash disposal at, or close to, its marginal social cost. A policy that achieves the same outcome but without the potential for increasing illegal disposal is a deposit/refund approach. These policies will be incapable of correcting this market failure and at the same time addressing all of the other concerns above. Moreover, "first-best" solutions will address these problems directly—for example, greenhouse gas emissions are reduced most cost-effectively with a carbon tax; and any distorting government policies in virgin material markets are best addressed by eliminating those policies.