Working Paper: NBER ID: w27683
Authors: H. Spencer Banzhaf
Abstract: The standard history of modern environmental economics often views it as an application of A.C. Pigou's theory of externalities, refined over the decades and applied to environmental problems in the 1960s, when the first detailed pro-posals for pricing pollution were outlined by Allen Kneese, Thomas Crocker, John Dales, and others. However, the historical literature has noted problems with this narrative, including a 30-year gap in discussions of such applications and few actual citations to Pigou. This paper offers a simple explanation for this puzzle: Namely, pollution pricing is not (necessarily) Pigouvian. It argues that the early applied literature on the topic was rooted more in questions about common property resources and increasing returns from developing natural re-sources. Both topics were treated by broad literatures by the 1960s, including distinctly American traditions not particularly associated with Pigou.
Keywords: pollution pricing; Pigouvian taxes; externalities; environmental economics
JEL Codes: B2; H23; Q2; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Neglect of Pigou's work (D62) | divergence in the evolution of pollution pricing mechanisms (Q58) |
| American traditions related to common property resources (P14) | early discussions on pollution pricing (Q52) |
| Broader intellectual context (F01) | development of pollution pricing (Q52) |