RES-ECON 162 Lecture Notes - Lecture 10: Price Mechanism

• School: UMASS-Amherst
• Department: Resource Economics
• Course: RES-ECON 162
• Professor: Laurence De Geeste

Document Summary

Firms are more efficient, making good at minimum aggregate cost. Price mechanism supposed to allocate resources to where they are most valued. Liability rules- make polluters responsible for the damage they cause. Strict liability- polluter is responsible for all damage. Negligence- polluter is responsible for damage if it did not exercise due care in preventing damage. Property rights approach- (cid:455)ou are tradi(cid:374)g (cid:455)our right to fish, use the lake i(cid:374) e(cid:454)cha(cid:374)ge for tra(cid:374)sactio(cid:374). Defi(cid:374)es a(cid:374)d allocates rights over the use or protectio(cid:374) of the e(cid:374)viro(cid:374)(cid:373)e(cid:374)t a(cid:374)d allows affected parties to trade these rights. Command and control simply mandate limits and methods of emission control. Incentive based policies- create the proper financial incentive for sources to control emissions. Implies the creation of a price" for releasing pollution. (reduce marginal abatement costs) Types of environmental policies (cont"d: incentive-based policies create the proper financial incentive for sources to control emissions. Implies the creation of a price" for releasing pollution.