Addressing Externalities: A Modest Proposal

by Daniel Farber | October 22, 2015

How to make health and safety a personal priority for industry officials.

According to economists, firms have little reason to take into account the cost of externalities — that is to say, the harms their activities may impose on others. The traditional solutions are damage remedies or taxes to transfer the financial cost to the industry, or regulation to force industries to limit their harmful activities. Why not try a more direct solution? Why not require owners and managers to expose themselves to the same risks?

For instance, we could require managers of nuclear plants, utility officials, and officials of reactor manufacturers to live within a mile of the plant, along with their families. That would enhance the incentive to think of safety.  Similarly, we might require oil company executives and their families to live within a mile of a refinery, so they would experience the same risks and the same exposure to air pollution as the surrounding community. Along the same lines, chemical company executives could also be required to live near their own facilities and drink the local water, as would operators of hazardous waste disposal sites. We could even imagine that coal company executives would be required to have their offices inside working coal mines.

Indeed, we could even multiply the risk in order to further incentivize safety. An economist once suggested that, if we really wanted to increase auto safety, we ...

Thoughts About the Future of Nuclear Power

by Daniel Farber | November 03, 2009
Cross-posted from Legal Planet. Apparently, substantially safer designs for nuclear reactors are now available. But the safe storage and disposal of nuclear waste is a significant challenge and a yet unresolved problem. Presently, waste is stored at over a hundred facilities across the country, within seventy-five miles of the homes of 161 million people. The major problem is the longevity of the waste – plutonium will be dangerous for 250,000 years. Although we may be able to model the geologic ...

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