Problem

What is a pollution charge and what incentive doe…

01:24

Problem 19 Hard Difficulty

What are the three problems that economists have noted with regard to command-and-control regulation?

Answer

Command-and-control environmental regulation limit the amount of pollution that could be
emitted in the economy by firms. It forces firms to install equipment which would reduce the
amount of pollution produced while production which means the firms now have to factor the
social costs also in their production costs. The three difficulties of command-and-control
environmental regulations are that there is lack of incentive which would push polluting firms to
improve more, lack of flexibility depending upon the industry type and conditions, there is scope
of cheating in regulations because are strong business lobbies which try to influence these
regulations.

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Principles of Microeconomics for AP® Courses

Chapter 12

Environmental Protection and Negative Externalities

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Video Transcript

So as we have discussed commanding control, it should be I'll be good too. Go over some problems that economists have with this command and control approach. The first is that there's no incentive to go beyond the standard if the government saying you could only pollute this much and not anymore. Well, firms will developed technologies to reduce air pollution up until that point, but there is no incentive for them to go beyond this right. They would just go to the center and then not waste your time trying to find new ways to decrease it. Uh, the second is that is that it's not flexible. Uh, not every firm pollutes to the same degree. So asking everyone to meet a certain standard might be, ah, lot more difficult for some companies. And it is for others. So we can't put everyone under the same standard. It wouldn't be a flexible standard that there is that It is legislators and analysts that right these policies, but legislators and analysts are very stuff jet, two re election processes and a lot of the time these big firms that pollute tend to spend a lot of resource is towards lobbying trying to get these legislators thio past policies that would benefit their firms. So it's not always, uh, good to have just legislators passed these regulations where there is No, it doesn't have that flexibility. Right? So these are the three main problems of economists, half with the command and control approach.

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