STANDARDS VERSUS PRICES REVISITED: THE CASE OF AGRICULTURAL NON‐POINT SOURCE POLLUTION

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Abstract
This paper demonstrates that the conventional neoclassical arguments for recommending a uniform discharge tax in preference to a uniform discharge standard are founded on highly restrictive and unrealistic abstractions of the pollution process. Relaxation of the assumptions reveals that the uniform standard outperforms the uniform tax in controlling ambient pollution levels over a potentially wide range of parameter values. The results of a study on agricultural sediment control are reported. It is argued that this pollution process is predisposed to the conditions that favour the ‘cross‐over’ in efficiency ranking between the two policies. These conditions are a high correlation between discharge abatement costs and pollution transport coefficients, and high variability in pollution transport coefficients relative to the interfirm abatement costs.

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