ECON 1 Lecture Notes - Lecture 14: East Los Angeles College, Ecotax, Sulfur Dioxide
Document Summary
They just don"t make things the way they used to . Take advantage of this- make things that don"t last. Not worse off- want good at lowest possible cost. Differences in production techniques throughout the world. Industrial pollution is application of how problem; least-cost production rule as solution. Command-and-control fails ignores principles of least-cost production. Best alternative: use water until has no additional uses (so mp = 0; Solution: tax on water for price of using clean water that reflects its value to society. Mpl/pl = mpk/pk > mpw/tw = 0. Firms must substitute away from water in favor of both labor & capital to minimize production costs. Offers same incentives to reduce pollution as pollution tax. Pay for right to pollute, or can sell permits. Market price of permit defines the cost to firms of additional pollution or the benefits of additional reductions in pollution, just as a pollution tax does.
