Correcting the overuse or underprovision of important assets

Regulations - command and control

Regulations, or command and control measures, have traditionally been the means of aligning public and private interests. Such measures-which include licenses, permits, quality standards, emission standards, process standards, product standards, and prohibitions-have the advantage of targeting a desired level (quantity) or quality of an asset more easily than other mechanisms. For example, air quality can be addressed by process standards or emissions standards.

Similarly, management and planning, also a regulatory approach, can sometimes work. For urban pollution, zoning and land use restrictions can be important if, for instance, there are economies of scale in dealing with pollution when firms are in one place. Though blunt, zoning can be an effective tool in handling environmental damage when the spatial dimension matters. Experience suggests, however, that regulations are sometimes less efficient and effective than market-based instruments-and costly in the institutional capacity they require for implementation.