Stock-to-stock externalities and multiple resources in renewable resource economics: Watersheds, conjunctive water use, reefs, and mud

Managing a resource without taking into account the external impacts on interacting resources/stocks leads to inefficient outcomes. Traditional resource economics is not capable of explaining the stock-to-stock externality and multiple resources problem. This dissertation consists of three main chapters discussing renewable resource problems in different contexts. The first chapter constructs a renewable resource management model with the "stock-to-stock" externalities problem. Specifically, it explains the problem of Hawai'i watershed management where the watershed has an external positive role in controlling downstream sedimentation. I show that the traditional stock externality literature is not applicable to the stock-to-stock externality problem. The watershed should be managed such that its marginal benefit equals the sum of marginal cost and marginal user cost. Marginal user cost, in this case, must incorporate the change in the future benefit of the watershed, the change in the future cost, and the cost of the externality. Corrective policies under different institutional setups (i.e. private owner vs. public concessionaire) are derived.; In the second chapter, the stock-to-stock externality model is applied to the problem of groundwater extraction and nearshore resources, in particular, the stock of Hawaiian native marine algae (also know as limu) in the ocean. In this chapter, I provide a regional hydrologic-ecologic-economic model concerning the interaction between groundwater use and the nearshore ecosystem. A numerical example is used to illustrate, using data from Kuki'o (North Kona Coast, the Island of Hawai'i). Two different approaches to incorporate the limu consideration are discussed. The first approach is to include the market value of limu in the model. The other is to impose a "safe minimum standard" for limu stock as a constraint.; The last chapter addresses the relationship between surface and groundwater in optimal water management. In particular, I develop a dynamic model of conjunctive water use, taking into account the conveyance losses that occur during water transportation. The efficiency prices for surface and groundwater at different locations and times are derived. The derived efficiency prices can be used as the basis for water pricing schemes or for exchange rates to facilitate water trading and water transfer.