Pigou's conjecture was that under costly taxation public expenditures should not reach the point where marginal benefits equal marginal costs. In the treatment here, public expenditures (and environmental protection) may provide public goods for consumption but also collective inputs for...

The ambient permit system proposed in the literature for cost-effective pollution reduction is difficult to implement and may result in lower net benefits than using another instrument. The article develops a model for comparing the environmental net benefits of three policy instruments for...