Chapter 10 Comparative analysis of alternative policy instruments

Abstract

This chapter accomplishes four specific goals of clarifying the contribution of economic analysis over the instruments of environmental policy. First, it describes the general situation in which environmental policy goals must be achieved. An appreciation of the complexity of this situation will provide a base from which to consider both past error and actual special cases. Second, it defines a set of dimensions along which policy instruments may usefully be judged. These include: static efficiency, centralized information and computation requirements, enforceability, dynamic incentive effects, flexibility in the face of exogenous change, and implications for goals other than efficiency. In the process, it intends to make explicit the irreducible political content of choices among policy instruments and thus the reasons that technical arguments on the other dimensions are not decisive in the political arena. Thirdly, it reviews both some major non-economic attempts to evade the complexity of the general case and the record of adoptions of explicitly economic prescriptions. Finally, it examines some of the economic complexities associated with a variety of instruments and problems.