Environmental Mechanism Designs in a New Order of Regulatory Capitalism

Jeffrey D. Mullen, Terence J. Centner and Michael E. Wetzstein

No 9357, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Complexity of environmental programs is most apparent with information asymmetries, making the design of efficient mechanisms particularly challenging. As developed theoretically in this paper, a new regulatory capitalism paradigm mating voluntary agreements with environmental education can produce outcomes at least as efficient as voluntary agreements alone. Such a design exploits a key difference between voluntary agreements versus educational programs in terms of their impact on agents' incentive compatibilities. Specifically, in a principal-agent model, voluntary agreements are associated with an incentive-compatibility constraint, whereas educational programs are not. The efficient bundle will likely consist of a set of education programs and voluntary agreements. With the new order of regulatory capitalism, it is time to concentrate on removing barriers yielding inefficient mono-mechanism design and start constructing multidimensional incentives to efficiently allocate effort toward environmental and economic goals.

Keywords: Command and control; environmental education; environmental policy; voluntary agreements; Environmental Economics and Policy (search for similar items in EconPapers)
Date: 2007
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