The government can remedy and externality by making certain behaviors either required or forbidden. For example it is a crime to dump poisonous chemicals into the water supply. In this case the external costs to society far exceed the benefit to the polluter. The government therefore institutes a command-and-control policy that prohibits this act altogether. In most cases of pollution however the situation is not this simple. Despite the stated goals of some environmentalists it would be impossible to prohibit all polluting activity. For example virtually all forms of transportation even the horse produce some undesirable polluting by-products. But it would not be sensible for the government to ban all transportation. Thus instead of trying to eradicate pollution entirely society has to weigh the costs and benefit to decide the kinds and quantities of pollution it will allow. In the United States the Environmental Protection Agency is the government...