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The Value of Information in Public Decisions

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Listed:
  • Arvind Magesan
  • Matthew A. Turner

Abstract

This paper considers the problem of an imperfectly informed regulator constrained in his choice of environmental regulation by the political opposition of those affected by the policy. We compare the value of two types of information to the regulator: the social cost of pollution and the profi tability of firms present in the economy. We find that in environments where small increases in the losses to regulated firms greatly a ffect the regulator's ability to implement the policy, it is most valuable to learn the types of firms, while it is most valuable to learn the social cost of pollution when small increases in losses are relatively ine ffectual.

Suggested Citation

  • Arvind Magesan & Matthew A. Turner, 2008. "The Value of Information in Public Decisions," Working Papers tecipa-345, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-345
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    References listed on IDEAS

    as
    1. Tracy R. Lewis, 1996. "Protecting the Environment When Costs and Benefits Are Privately Known," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 819-847, Winter.
    2. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    3. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(2), pages 312-319.
    4. Becker, Gary S., 1985. "Public policies, pressure groups, and dead weight costs," Journal of Public Economics, Elsevier, vol. 28(3), pages 329-347, December.
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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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