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Markets in licenses and efficient pollution control programs

Montgomery, W. David (1972) Markets in licenses and efficient pollution control programs. Journal of Economic Theory, 5 (3). pp. 395-418. ISSN 0022-0531. doi:10.1016/0022-0531(72)90049-X.

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[Introduction] Artificial markets have received some attention as a means of remedying market failure and, in particular, dealing with pollution from various sources. Arrow has demonstrated that when externalities are present in a general equilibrium system, a suitable expansion of the commodity space would lead to Pareto optimality by bringing externalities under the control of the price system. Since his procedure is to define new commodities, each of which is identified by the type of externality, the person who produces it and the person who suffers it, his conclusion is pessimistic. Each market in the newly defined commodities involves but one buyer and one seller, and no forces exist to compel the behavior which would bring about a competitive equilibrium.

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Additional Information:© 1972 Academic Press. Received May 19, 1972. Parts of this article appeared in my Ph.D. dissertation “Market Systems for the Control of Air Pollution,” submitted to the Department of Economics at Harvard University in May, 1971. Research on this thesis was partly supported under Grant No. AP-00842 from the Environmental Protection Agency to Walter Isard. I am also indebted to Kenneth Arrow and James Quirk for valuable advice. Needless to say, all errors are solely the responsibility of the author. Originally issued as Social Science Working Paper 9.
Group:Social Science Working Papers
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Environmental Protection Agency (EPA)AP-00842
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Social Science Working Paper9
Issue or Number:3
Record Number:CaltechAUTHORS:20171207-153348250
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83742
Deposited By: Jacquelyn Bussone
Deposited On:21 Dec 2017 18:40
Last Modified:15 Nov 2021 20:13

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