Chapter 16, Problem 1.4P

A paper factory dumps polluting chemicals into the Snake River. Thousands of citizens live along the river, and they bring suit, claiming damages. You are asked by the judge to testify at the trial as an impartial expert. The court is considering four possible solutions, and you are asked to comment on the potential efficiency and equity of each. Your testimony should be brief.

1. a. Deny the merits of the case and affirm the polluter’s right to dump. The parties will achieve the optimal solution without government.
2. b. Find in favor of the plaintiff. The polluters will be held liable for damages and must fully compensate citizens for all past and future damages imposed.
3. c. Order an immediate end to the dumping, with no damages awarded.
4. d. Refer the matter to the Environmental Protection Agency, which will impose a tax on the factory equal to the marginal damage costs. Proceeds will not be paid to the damaged parties.