EC238 Lecture Notes - Lecture 6: Smog, Socalled, Mcgraw-Hill Education
Document Summary
In this lesson we will learn how accidents like the exxon valdez pictured above that negatively affect tens of thousands of people complicate the application of liability laws to deal with pollution problems. This lesson and the next two together cover key elements of the economic analysis of the environment and environmental policy. The principles and theory we cover in these lessons will become the tools of analysis that we will apply when looking at environmental policy. One point that can scarcely be stressed enough is the distinction between cost- effective policies and socially efficient ones. A socially efficient allocation requires that the marginal damages from pollution be equated to the marginal cost of abatement. In order for efficiency to be achieved, we would need some reasonable estimate of the value of the damages from pollution. As we noted in last week"s lesson, we often have only a very rough idea of the dollar value of these damages.
