How Can Transaction Cost Economics Help Regulators Choose Between Environmental Policy Instruments?

Abstract

Environmental economics has employed the seminal contribution of Ronald H. Coase (1960) intensively but has remained relatively unaffected by the contributions of perhaps his most influential follower, Oliver E. Williamson. As an initial step in addressing this oversight, we apply the analytical framework of discrete structural alternatives to the choice of policy instruments. Environmental-related transactions, which differ in their attributes, are aligned with categories of policy instruments, which differ in their cost and competence, so as to effect a discriminating - mainly transaction costs-economizing - result. Insightful strategic and policy implications are stressed.

Keywords: Transaction cost economics, Williamson, Environmental policy

JEL Classification: D23, K32, Q58