Reference no: EM132497675

Economic Incentives

In the book, What Price Incentives?, the author, Steven Kelman, suggests that the use of economic incentives (such as emission charges or emissions trading) in environmental policy is undesirable. He argues that transforming our mental image of the environment from a sanctified preserve to a marketable commodity has detrimental effects not only on our use of the environment, but also on our attitude toward it. He believes that applying economic incentives to environmental policy weakens and cheapens our traditional values toward the environment.

Prepare a three-page paper (not including the title and reference pages) on the following:

Question 1: Evaluate whether economic incentive systems are more or less ethically justifiable than the traditional regulatory approach. Consider the effects of economic incentive systems on prices paid by the poor, on employment, and on the speed of compliance with pollution control laws as well as the author's thesis.

Question 2: Kelman believes that emission allowances automatically prevent environmental degradation since they are more ethically desirable than emission charges. Compare and contrast the advantages and disadvantages associated with the two systems: emission allowances and emission charges. Discuss whether you are in alignment or not with the author (Kelman). Defend your position.

Question 3: If we were to allow the private market to bring about an efficient outcome that society would deem desirable, could the true market benefit and cost be effectively reflected? Explain why and use an example to illustrate your response.