Command And Control and Externalities

These flashcards cover key concepts and details related to command and control policies, externalities, tax, and subsidy mechanisms as discussed in the lecture.

What are the two broad approaches to government action when private solutions to externalities are not feasible?

Command and control policies and market-based policies.

What is the main issue with command and control policies in environmental regulations?

The government may not have complete information on the best method to reduce pollution.

Why might producers lack incentives under command and control regulations?

They are required to use specific technologies instead of pursuing more efficient methods.

What is an example of a situation where command and control might be the best approach?

Controlling vaccinations for deadly diseases where high compliance is necessary.

Who proposed the idea of a corrective tax to internalize externalities and what is it called?

A.C. Pigou proposed it and it is called a Pigouvian tax.

What does a Pigouvian tax do in the context of externalities?

It adds the external cost to the marginal private cost to align it with the marginal social cost.

How can a Pigouvian subsidy help with positive externalities?

It reduces the cost for the individual, shifting their marginal private benefit to the marginal social benefit.

What challenge do governments face when trying to value externalities to calculate the correct tax or subsidy?

It can be difficult and costly to value intangible effects and administer the tax.

What is one reason why command and control policies may be preferred despite their drawbacks?

They may be suitable when the best approach to a problem is well-known and requires broad participation.

What are quiet hours an example of in relation to externalities?

They are an alternative policy response to managing noise externalities from neighbors.