ENTITLEMENTS, MISSING MARKETS, AND ENVIRONMENTAL-POLICY

It is argued that while environmental damage may impose a cost on future generations, this is not due to failure of entitlements nor due entirely to missing markets. Environmental damage may be viewed as nonconvexities which result in intertemporal externalities. One such nonconvexity is missing markets, and the implications of incorporating these are considered. Three simple models identify the essential policy issues, namely the problem of incentives, legal liability, and the divergence between private and social costs. © 1991.