Free To Choose: a personal Statement

particularly the large and important ones. More recently they
have been joined by the self-styled, highly organized "public
interest" groups that profess to speak for a constituency that may
be utterly unaware of their existence.
Most economists agree that a far better way to control pollution
than the present method of specific regulation and supervision is
to introduce market discipline by imposing effluent charges. For
example, instead of requiring firms to erect specific kinds of waste
disposal plants or to achieve a specified level of water quality
in water discharged into a lake or river, impose a tax of a
specified amount per unit of effluent discharged. That way, the
firm would have an incentive to use the cheapest way to keep
down the effluent. Equally important, that way there would be
objective evidence of the costs of reducing pollution. If a small
tax led to a large reduction, that would be a clear indication that
there is little to gain from permitting the discharge. On the other
hand, if even a high tax left much discharge, that would indicate
the reverse, but also would provide substantial sums to compen-
sate the losers or undo the damage. The tax rate itself could be
varied as experience yielded information on costs and gains.
Like regulations, an effluent charge automatically puts the cost
on the users of the products responsible for the pollution. Those
products for which it is expensive to reduce pollution would go
up in price compared to those for which it is cheap, just as now
those products on which regulations impose heavy costs go up
in price relative to others. The output of the former would go
down, of the latter up. The difference between the effluent charge
and the regulations is that the effluent charge would control pol-
lution more effectively at lower cost, and impose fewer burdens
on nonpolluting activities.
In an excellent article A. Myrick Freeman III and Robert
H. Haveman write, "It is not entirely facetious to suggest that the
reason an economic-incentive approach has not been tried in this
country is that it would work."
As they say, "Establishment of a pollution-charge system in
conjunction with environmental quality standards would resolve

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FREE TO CHOOSE: A Personal Statement
most of the political conflict over the environment. And it would
do so in a highly visible way, so that those who would be hurt
by such a policy could see what was happening. It is the open-
ness and explicitness of such choices that policy makers seek to
avoid."
18
This is a very brief treatment of an extremely important and
far-reaching problem. But perhaps it is sufficient to suggest that
the difficulties that have plagued government regulation in areas
where government has no place whatsoever—as in fixing prices
and allocating routes in trucking, rail travel, and air travel—also
arise in areas where government has a role to play.
Perhaps also it may lead to a second look at the performance
of market mechanisms in areas where they admittedly operate
i mperfectly. The imperfect market may, after all, do as well or
better than the imperfect government. In pollution, such a look
would bring many surprises.
If we look not at rhetoric but at reality, the air is in general
far cleaner and the water safer today than one hundred years ago.
The air is cleaner and the water safer in the advanced countries
of the world today than in the backward countries. Industrial-
ization has raised new problems, but it has also provided the
means to solve prior problems. The development of the auto-
mobile did add to one form of pollution—but it largely ended a
far less attractive form.
DEPARTMENT OF ENERGY
The embargo of the United States instituted by the OPEC cartel
in 1973 ushered in a series of energy crises and occasional long
lines at gasoline stations that have plagued us ever since. Govern-
ment has reacted by establishing one bureaucratic organization
after another to control and regulate energy production and use,
terminating in the establishment of a Department of Energy in
1977.
Government officials, newspaper reports, and TV commenta-
tors regularly attribute the energy crisis to a rapacious oil indus-
try, or wasteful consumers, or bad weather, or Arab sheikhs. But
none of these is responsible.
After all, the oil industry has been around for a long time—

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