Map of Lichtaart on A variation of this approach is for the government to allocate to firms permits to release a specific amount of pollutant, and allow a free trade in the permits; this results in the pollution level being reduced in the most efficient way, as firms that can reduce cheaply will do so and sell their pollution permits to other firms that could only reduce their pollution at great cost. A limitation of each of these solutions is that policymakers must have detailed information on the extent of external costs and benefits, or the socially optimal quanexternalities 277 tity. In many cases policymakers lack this detailed information, making it difficult for them to maximize social welfare in markets with externalities. Ronald COASE proposed an ingenious solution to the problem of externalities that does not require the government to have any information about the value of external costs or benefits or about the optimal quantity. In a seminal 1960 article entitled The Problem of Social Cost, Coase showed that the problem of externalities stems from unassigned property rights. For example, no one possesses property rights to the air; if citizens had property rights to the air, they could deny firms the right to pollute the air, or they could allow firms to pollute in exchange for payments that at least covered the external costs of pollution. On the other hand, if firms had the property rights to the air, they could demand payments from citizens in exchange for not exercising the right to pollute. Map of Lichtaart 2016.
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Map of Lichtaart Holiday Map Q.