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The Firm and Private Environmental Strategies10

The Firm and Private Environmental Strategies10 - The...

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The Problem of Social Cost: The contribution of Ronald Coase, 1991 Nobel Prize in Economics. 1. Emphasis on the reciprocal nature of environmental problems (polluter/pollutee). Hence, he focuses not on the externality, but on the transaction or the transaction that does not take place. Why might this make sense for solving environmental and resource problems? 2. Coase was concerned with whether or not Pigouvian taxes should be used to equate private and social costs of production and thereby change behavior and eliminate the externality. Coase rejected automatic reliance on Pigouvian taxes. Why? 3. Why might it be non optimal (inefficient) to always subsidize the victim? 3. If we view environmental and resource problems as ones of “contract” that is a potential transaction (to reduce air pollution, over fishing, etc), how does that change how we view environmental and resource problems? 4. What does it mean to say if transaction costs are zero?
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