In an effort to reduce pollution, the government tried two policy prescriptions under the Clean Air Act Amendments of 1990. The first—command and control—mandated that each power plant lower its pollution by a determined amount. However, different firms face different cost curves and, because information is dispersed, policymakers don’t always know those costs. The second policy prescription—tradable pollution permits—empowered firms to use knowledge of their cost curves to buy or sell pollution permits as needed. Under this policy, the invisible hand of the market helped discover the lowest cost way of reducing pollution.
Microeconomics Course: http://bit.ly/20VablY
Ask a question about the video: http://bit.ly/1p5hfkn
Next video: http://bit.ly/1R24Bch
Help us caption & translate this video!