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Chapter 12: Q.19 (page 297)

What are the three problems that economists have noted with regard to command-and-control regulation?

Short Answer

Expert verified

1) They provide no incentive to go beyond the limits they set.

2)They provide limited flexibility in terms of where and how pollution might be reduced.

3)They are frequently loaded with politically driven loopholes.

Step by step solution

01

Command-and-control regulation :

The enforced environmental policy is directed by command-and-control policy. It depicts a certain form of regulation.

02

Three problems regarding to command-and-control regulation are :

1. Regulation based on command and control provides little incentive to enhance environmental quality beyond the standard set by a specific statute. Polluters have little motivation to improve after they reach the benchmark.

2. Regulation based on command and control is rigid. Meeting the criteria may be challenging and costly for businesses. Firms have no motivation to fundamentally rethink their manufacturing practices in order to minimize pollution even more and at a lower cost.

3. Politically driven loopholes are common in real-world rules.

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Most popular questions from this chapter

What are better-defined property rights and what incentive do they provide to account for external costs?

What is a pollution charge and what incentive does it provide for a firm to take external costs into account?

As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?

Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?

Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table 12.6shows the total amount of garbage (in tons) that each firm currently produces. The other rows of the table show the cost of reducing garbage produced by the first five tons, the second five tons, and so on. First, calculate the cost of requiring each firm to reduce the weight of its garbage by one-fourth. Now, imagine that the government issues marketable permits for the current level of garbage, but the permits will shrink the weight of allowable garbage for each firm by one-fourth.

What will be the result of this alternative approach to reducing pollution?


Elm
Maple
Oak
Cherry
Current production of garbage (in tons)
20406080
Cost of reducing garbage by first five tons
\(5,500
\)6,300
\(7,200
\)3,000
Cost of reducing garbage by second five tons
\(6,000
\)7,200
\(7,500
\)4,000
Cost of reducing garbage by third five tons
\(6,500
\)8,100
\(7,800
\)5,000
Cost of reducing garbage by third five tons
\(7,000
\)9,000
\(8,100
\)6,000
Cost of reducing garbage by fifth five tons
\(0
\)9,900
\(8,400
\)7,000
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