When correcting for an externality, command-and-control policies are always preferable to market-based policies.

Question

Quizplus · Accepted Answer

Market-based policies, such as taxes and tradable permits, can often achieve the desired correction for an externality more efficiently by providing economic incentives for private decision-makers to change their behavior, whereas command-and-control policies mandate specific actions and can be less flexible and more costly.

When Correcting for an Externality, Command-And-Control Policies Are Always Preferable