Question

Is command and control regulation a great solution to solving issues that arise from externalities? Use an example consistent with the best and worst ways to use this solution.

Answer 1

Command & control regulation is one solution to control the externalities and prevent market failure. But, it is not the greatest solution, and it is not one fit for all policy. It can be understood by examples. The one example of it is factories creating pollution. Here, command and control regulation in the form of applying tax, will be a good solution to make the firm apply clean and green technologies. It will prevent negative externalities. Here, command & control regulation is a good solution for this case. Another case is the neighbor playing loud music and disturbing all the people in the society. In this case, the right solution will be negotiation, awareness and interaction to make the neighbor stop playing music so loud. Here, command and control regulation will not work and it will be the worst solution in this case.