Retroactive Liability or the Public Purse?

Journal of Regulatory Economics (1997).

Posted: 21 May 1997

See all articles by James Boyd

James Boyd

Resources for the Future

Howard Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department; National Bureau of Economic Research (NBER)

Abstract

The article addresses the question of whether responsibility for pollution created in the past should be retroactively applied to firms, or if the costs of cleaning up existing pollution should be financed by the public. We show that making firms liable for retrospective environmental costs can weaken the incentive to take precautions against future environmental costs. This follows since public financing of these costs can lead to greater prospective risk deterrence by allowing firms to more fully internalize the costs of future environmental risks. However, an analysis of existing public financing approaches highlights a set of dangers associated with their practical use.

JEL Classification: Q20

Suggested Citation

Boyd, James William and Kunreuther, Howard C., Retroactive Liability or the Public Purse?. Journal of Regulatory Economics (1997).. Available at SSRN: https://ssrn.com/abstract=11483

James William Boyd (Contact Author)

Resources for the Future ( email )

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Howard C. Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department ( email )

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National Bureau of Economic Research (NBER)

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