Pollution, Prices, and Public Policy: a study sponsored jointly by Resources for the Future, Inc. and the Brookings Institution

Over the past fifteen years, the federal government has developed policies to reduce air and water pollution that rely heavily on very detailed regulation of polluters and on generous subsidies for the construction of waste treatment plants. In this study, Allen V. Kneese and Charles L. Schultze argue that the combination of regulations and subsidies is an expensive and ineffective way to deal with air and water pollution. After summarizing the economic and technical background necessary to understand the pollution control problem, the authors review the legislative history of federal pollution control efforts and discuss the high costs and enforcement difficulties that plague those efforts. They propose alternative policies designed to change economic incentives and institutions so that individuals, business firms, and municipalities would find it in their own interest to reduce pollution. The proposed incentives take the form of effluent and emission charges - stiff taxes levied on each unit of pollutant discharged into the air or water. The authors also propose the establishment of federally sponsored regional authorities charged with developing overall plans for air and water pollution control. Finally, viewing air and water pollution as examples of much broader class of complex social problems, they examine why Congress has trouble designing legislative solutions and suggest some means of improving congressional performance.