Students are introduced to the concept of the externality, the Coase theorem and the importance of property rights as a determinant of market failure. Alternative revelation methods for determining the value of public goods are presented. The optimality of the Pigouvian tax based solution is derived and contrasted to other regulatory methods of pollution control including tradable permits, environmental subsidies and command and control. The proper implementation of these measures is explored within the context of imperfect competition, imperfect mixing, imperfect monitoring ability, uncertainty and tax interaction effects. The final part of the course deals with the monitoring and enforcement of environmental regulations; and the ex-post regulation of environmental hazards using strict and negligence based liability versus ex-ante standards.
Method of assessment:
Two hour exam (100%)