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Environmental Mechanism Designs in a New Order of Regulatory Capitalism

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  • Mullen, Jeffrey D.
  • Centner, Terence J.
  • Wetzstein, Michael E.

Abstract

Complexity of environmental programs is most apparent with information asymmetries, making the design of efficient mechanisms particularly challenging. As developed theoretically in this paper, a new regulatory capitalism paradigm mating voluntary agreements with environmental education can produce outcomes at least as efficient as voluntary agreements alone. Such a design exploits a key difference between voluntary agreements versus educational programs in terms of their impact on agents' incentive compatibilities. Specifically, in a principal-agent model, voluntary agreements are associated with an incentive-compatibility constraint, whereas educational programs are not. The efficient bundle will likely consist of a set of education programs and voluntary agreements. With the new order of regulatory capitalism, it is time to concentrate on removing barriers yielding inefficient mono-mechanism design and start constructing multidimensional incentives to efficiently allocate effort toward environmental and economic goals.

Suggested Citation

  • Mullen, Jeffrey D. & Centner, Terence J. & Wetzstein, Michael E., 2007. "Environmental Mechanism Designs in a New Order of Regulatory Capitalism," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9357, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea07:9357
    DOI: 10.22004/ag.econ.9357
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    Environmental Economics and Policy;

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