Every intro text in economics talks about market-based techniques for dealing with pollution, and refers to Pigouvian taxes — effluent charges — as the right way to go (cap and trade can be equivalent). And I’d always assumed that Pigou himself wrote about pollution.
But as part of a longer-term project I’m working on I actually looked at The Economics of Welfare, and here’s the passage in question:
Corresponding to the above investments in which marginal private net product falls short of marginal social net product, there are a number of others, in which, owing to the technical difficulty of enforcing compensation for incidental disservices, marginal private net product is greater than marginal social net product. Thus, incidental uncharged disservices are rendered to third parties when the game-preserving activities of one occupier involve the overrunning of a neighbouring occupier’s land by rabbits—unless, indeed, the two occupiers stand in the relation of landlord and tenant, so that compensation is given in an adjustment of the rent. They are rendered, again, when the owner of a site in a residential quarter of a city builds a factory there and so destroys a great part of the amenities of the neighbouring sites; or, in a less degree, when he uses his site in such a way as to spoil the lighting of the houses opposite …
The principle is there, all right. But, I mean, rabbits? And no, this wasn’t written in an era when England was still a green and pleasant land; this was written in 1920, when much of the population lived in sooty, smog-ridden industrial conurbations.
Not what I expected.
I had to look up conurbation. It means city. I learned something new today.
