ABSTRACT
This chapter discusses the ways private and collective actions lead to socially unsatisfactory conditions provides a conceptual framework for diagnosing public policy problems. It focuses on what we call generic policies—the types of actions that government can take to deal with perceived policy problems. Many environmental policy analysts conclude that tradable permits are superior to emissions standards in terms of the informational burden, the speed of compliance, and in making appropriate trade-offs between economic growth and environmental protection. Policy analysts, bureaucrats, and politicians have engaged in heated debates about the relative merits of incentives versus other generic policies. A potentially important role for output taxes is the preservation of rent in structural open-access situations. Rent capture through unit taxes is an efficiency-enhancing policy if it reduces extraction efforts that are dissipating rents.
