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A History of Pricing Pollution (Or, Why Pigouvian Taxes are not Necessarily Pigouvian)

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  • 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.

Suggested Citation

  • H. Spencer Banzhaf, 2020. "A History of Pricing Pollution (Or, Why Pigouvian Taxes are not Necessarily Pigouvian)," NBER Working Papers 27683, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:27683
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    JEL classification:

    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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