Public Finance, 2nd Edition

1. The IB approach led to a more stringent maximum standard, 90 mg/

m

3

vs. 100 mg/m

3

of TSP. The advantage derived from the superior cost

properties of the approach which allowed the marginal beneWts and costs to

equate at a lower TSP level.

2. At the same time, the CAC approach provided substantially better

average overall air quality throughout the area for any given maximum

standard because it leads to larger TSP reductions in the regions for which

the constraint is not binding. An IB approach is more forgiving of pollution

in the nonbinding regions. Consequently, at the optimal maximum standard

under each approach (90 and 100 mg/m

3

), the improvement in the area-

wide average air quality from the IB approach was negligible (62.9 vs.

63.7 mg/m

3

).

3. The net beneWts in going from a ``baseline'' standard of 120 mg/m

3

of

TSP to the maximum standards under each approach were similar. The IB

approach had only a $6 million advantage in net beneWts over the CAC

approach.

Oates, et al. concluded that there may not be much diVerence between a

feasible IB approach (i.e., a single tax) and a well-designed CAC approach.

They concede, however, that a CAC approach that pays no attention to

diVerences in abatement costs and applies uniform controls on all Wrms

may be much worse than a feasible IB approach.

4. A Wnal result of interest is that the marginal costs of abatement are

quite steep and the marginal beneWts fairly Xat in the region of the 90-mg/m

3

optimal standard under the IB approach. This suggests a preference for the

IB over CAC approach for reducing TSP given the large uncertainties asso-

ciated with the marginal cost and marginal beneWt estimates, particularly the

marginal beneWts.

MUNICIPAL WASTE-TREATMENT FACILITIES AND THE

SUPERFUND: DEFENSIVE ANTIPOLLUTION STRATEGIES

Pollution taxes, marketable permits, and CAC are strategies designed to

reduce pollution at its source. In contrast, municipal waste-treatment facil-

ities and the Superfund are defensive strategies. They simply remove the

pollution that has already occurred.

Cleaning up pollution after the fact is certainly a policy worth consider-

ing. Suppose someone invented a method for removing vast amounts of

water pollutants or hazardous wastes for only a few pennies. Clearly an

antipollution policy would want to make liberal, perhaps exclusive, use of

this technology. Recall the factory±laundry example from Chapter 7, which

suggested that simply moving the laundry upwind from the factory may be

less expensive and more eVective than a Pigovian tax designed to reduce the

factory's smoke emissions. Generally speaking, any technology or solution is

8. THE U.S. ANTIPOLLUTION POLICES: AN APPLICATION OF EXTERNALITY THEORY 253