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ECON 3340_Chapter 11.docx

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ECON 3340
Andrea Podhorsky

Chapter 11: Regulating Pollution Rational For Regulation - Public interest theory (normative theory) p.219 1. Imperfect of completion 2. Imperfect of information – GMO labeling 3. Public goods/bads - Interest group theory (positive theory) Maintains that rent seeking is the primary rationale for regulation Figure 11.1 Lessons 1. Imperfect link between parliament/regulator and the pollution generating activity.  Time delays, cheating  Principal – agent problem -> moral hazard and conflict of interest 2. Legislature does not necessarily act as an efficient benevolent maximize of social well-being. (endogamous polities) Basic Regulatory Instruments A. Prescriptive Regulations/Command and Control Regulation  Regulator specifies the steps for the individual polluters to take  Regulator collect the information necessary to decide the physical actions  Pollution control equipment requirement or specify an emission limit. E.g. Ontario’s “Drive Clean” program identifies vehicles that don’t meet provincial stds. For NO, VOC, CO. Pro’s: (p.225)  Simplicity in regulating complex processes (flexibility in regulating complex environmental processes)  Easy monitoring and compliance ( much greater certainty in how much pollution will result from regulations) Con’s  Maybe costly to administers  Reduced incentives to find better ways to control pollution  Inefficiency pollution control are not equalized; Difficulty in satisfying t
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