ABSTRACT
This chapter provides an overview of the American experience with market mechanisms as a pollution control strategy. Within the existing positive literature on market mechanisms, it is possible to discern two general types of explanations for their emergence: wealth-maximization theory and distributional theory. The wealth-maximization theory traces its provenance to the property rights literature of neoinstitutional economics and in particular to the pioneering work of Harold Demsetz. The distributional theory traces its provenance to the interest group theory of politics, the leading figure in the case being Mancur Olson. To engage in an assessment of the two competing positive theories for explaining the emergence of market mechanisms, it is necessary to have some data regarding when market mechanisms are adopted and what form they take when adopted. The slow emergence of market mechanisms in environmental law may perhaps also be best explained using a similar synthetic model.
