Efficiency without Optimality: Environmental Policies and Pollution Pricing in the late 1960s

Nathalie Berta ()
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Nathalie Berta: REGARDS - Recherches en Économie Gestion AgroRessources Durabilité Santé- EA 6292 - URCA - Université de Reims Champagne-Ardenne - MSH-URCA - Maison des Sciences Humaines de Champagne-Ardenne - URCA - Université de Reims Champagne-Ardenne

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Abstract: In the late 1960s, new environmental policies emerged which attempted to reach predetermined pollution standards in a cost-effective way: i.e., the ‘standard-and-tax' approach proposed by William J. Baumol and Wallace E. Oates and the permits market approach proposed by John Dales. This paper describes the early history of the two approaches, and compares them. Although they flow from different traditions, namely Pigovian versus Coasean, and are often contrasted in the literature, these cost-effective solutions emerged at the same time and for the same reasons. First, they both tried to promote incentives-based policies against traditional regulations; second, they criticized the optimal Pigovian tax, which raised the contentious issue of measuring pollution damage. More broadly, they emerged as a kind of pragmatic compromise, fed by a common attempt to move toward more practical policies: reaching efficiency without optimality, while relying on standards whose setting is a matter for political decision.

Keywords: cost efficiency; Pigovian tax; Market for rights; pollution control; Environmental policies; John Dales; emission trading; William Baumol (search for similar items in EconPapers)
Date: 2020-12
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Published in Journal of the History of Economic Thought, 2020, 42 (4), pp.539-562. ⟨10.1017/S1053837219000579⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02566526

DOI: 10.1017/S1053837219000579

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