We argue analytically that many commonly used models of pollution-generating technologies, which treat pollution as a freely disposable input or as a weakly disposable and null-joint output, may generate unacceptable implications for the trade-offs among inputs, outputs, and pollution. We show...

Distinguishing between intended ("good") production and unintended or residual ("bad") generation, we introduce the concept of by-production. In by-production technologies, pollution is an output that satises a "costly disposability" assumption and violates standard free disposability with...

We characterize Pareto-improving and equilibrium-preserving policy reforms in a second-best (Diamond/Mirrlees) world with a consumption externality. A counterintuitive finding is that, starting from an initial equilibrium with no direct quantity control on the externality, it is possible that...

We distinguish between intended production and residual generation and introduce the concept of by-production. We show that by-production provides the fundamental explanation for the positive correlation that is observed between intended production and residual generation. Most of the existing...

In economies with Ramsey taxation, decreasing returns to scale, and private ownership, we show that second-best production efficiency is desirable when the grouping of private firms induced by the profit taxation power of the government is at least as fine as the grouping of firms induced by the...