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Sit in on Environmental Economics and Policy 39C:
Using Economics to Analyze Debate Hot Topics

Professor Jeff Perloff's undergraduate seminar EEP 39C explores some of the most controversial political and social topics of the day. The two-unit class fosters lively -sometimes heated-discussions on student-chosen topics that have included the economics of gay marriage, mad cow disease, digital music piracy, and even the value of human life. The catch? Students must make their case based on hard data and valid economic analysis.

Occasionally, Perloff holds the same debate twice, forcing students to switch sides so they can fully understand the opposing point-of-view.

One topic that was popular in Perloff's class last semester focused on drilling in the Arctic National Wildlife Refuge. Should ANWR continue in its undeveloped state, or should it be opened for oil drilling? Proponents argue that extracting this oil would substantially reduce the prices of petroleum and decrease U.S. dependence on foreign oil. Opponents, on the other hand, claim that drilling would harm the environment and some maintain that pushing down the price of fuel at the pump would increase consumption and, therefore, pollution.

Though their research and calculations, the students found that ANWR could eventually produce about 800,000 barrels of oil per day, increasing the volume of oil on the global market by about 0.7 percent by 2020. Then they calculated the effect the extra oil would have on future prices.

Because the overall oil output from ANWR would be a very small portion of the worldwide market, the new supply curve (S2, on the blackboard above) would be only a hair to the right of the existing supply (S1). What exactly does that mean? The cost of oil would drop by about 1.4 percent -a barely noticeable 33 cents per barrel.

Students analyzing the ANWR debate ended up questioning the prediction of both friends and foes of drilling. ANWR oil won't reduce the world price of oil by much, their analysis showed, so it won't insulate the American market from world events. And with prices that would only translate to three or four cents at the pump, prices wouldn't noticeably affect U.S. driving habits, either.

Says Emily Giles, a student in last year's class: "topics such as ANWR and junk food in schools as it relates to obesity would not have been discussed in any of my other economics courses." Giles, who now works for a financial management company that helps cities in fiscal crisis, also says that Perloff's guidance helped her "learn what questions to ask when presented with facts and figures."

"A course like this is important because it shows how invalid arguments get misused as facts when people don't understand basic economics," says Perloff. "For example, politicians love to say that supply equals demand. But that simply isn't true in our type of economy."

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