Journal Article The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities: Comment Get access Robert E. Kohn Robert E. Kohn Southern Illinois University at Edwardsville Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 101, Issue 3, August 1986, Pages 625–630, https://doi.org/10.2307/1885700 Published: 01 August 1986

[A linear programming model is used to estimate the cost of achieving certain air quality goals for the St. Louis airshed. The choice set of control methods is based on engineering data compiled by the author. The model is used to generate a set of alternative air quality levels for sulfur dioxide and particulates which can be attained at the same total cost as the goals initially considered. This frontier of trade-off possibilities is compared to a particular social indifference curve which is based on medical considerations. It is found that both curves are concave in the same direction.]

IN the economic lilterature on externalities, two separate approaches to pollution control are distinguished; (1) government regulations to enforce control and (2) tax and subsidy schemes to stimulate voluntary abatement.' The dichotomy, however, is not always sharp. Enforced con'trols impose changes on economic activities which may increase costs and induce voluntary shifts away from pollution intensive activities. For example, a limitation on the sulfur content of industrial coal might stimulate the substitution of cleaner burning natural gas. In addition, the higher production costs associated with the shift to low sulfur coal or to natural gas may add to the prices of related outputs, reducing the demand for these products. In turn, substitutions among outputs may occur which will further alter the levels of production and consumption activities from what they would be in the absence of pollution control. Cost-effectiveness models for achieving environmental goals generally ignore induced voluntary abatement. As a consequence, the proposed solutions may be incorrect in that (a) the environmental goals would be exceeded and (b) the total cost of control would not be a minimum cost. This paper presents an air pollution control model in which both required control activity and the induced voluntary adjustments in consumption and production levels are taken into account. II The Cost-effectiveness Model with Fixed Production and Consumption Levels