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"A comprehensive and accessible textbook that connects the latest research on economic regulation with an examination of how regulation is applied in eight essential service industries. Discussion questions explore current debates and online materials include over 60 applied exercises based on real life regulatory problems"--

A comprehensive and accessible textbook that connects the latest research on economic regulation with an examination of how regulation is applied in eight essential service industries. Discussion questions explore current debates, and online materials include over 60 applied exercises based on real-life regulatory problems.

The study of environmental economics is motivated by the idea that pollution constitutes a negative externality. When production costs do not include the harm to human health and the environment, the market price is too low and output levels are too high, relative to the efficient levels. The initial solution to this problem is usually the "the Pigovian tax" on production. However, all subsequent tax analysis focuses directly on emissions. This tends to leave students wondering (a) why discuss Pigou in the first place and (b) why is it better to focus on pollution emissions rather than production. I provide a graphical analysis, using isoquant and isocost geometry, to illustrate that a direct fee on the externality-generating input is more efficient than a tax on output. This analysis is something teachers might consider utilizing to clarify why there is a transition from output taxation to input taxation. JEL Classifications: A22, A23, Q50

AbstractThis paper considers the level of, and changes in, optimal noncompliance penalties under the following conditions: (i) where the regulator responsible for setting policy parameters, such as a penalty, is different from (and thus may have a different objective from) the regulator responsible for enforcing existing regulations; and (ii) where enforcement behavior changes from one in which enforcers are unresponsive to overtures on the part of firms to increase compliance to one in which enforcers are responsive to such overtures. The model developed shows that when enforcers "switch" from unresponsive to responsive enforcement, the optimal penalties for noncompliance need to be reduced. The analysis also gives insights as to what variables dictate the degree of penalty reduction.