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Weekly update 45

posted Jan 30, 2015, 7:12 AM by Austin Milt   [ updated Jan 30, 2015, 7:12 AM ]
I've been struggling with how to go from 

to a policy recommendation, such as "make everyone reduce their impacts by X amount." The issue is that under some pretty safe assumptions about what information regulators and developers have - regulators know their impacts and developers know impacts and costs - the developers have an incentive to lie. Take that figure above. If you are a developer and a regulator asks you to submit a plan for development for approval, in the absence of regulation you'd submit the (0, 0) plan, i.e. your least-cost plan. However, when you know you're going to have to reduce impacts by some, you have an incentive to submit a plan that's at (<0, 0), i.e. a plan that's just as cheap as your least-cost plan, but is way more impacting. That way, you can "reduce" impacts without incurring any cost.

The challenge for me is to come up with a system that makes developers plan to develop further to the right on their tradeoff curves. I've got some ideas, but I dont know if they would fly for an actual regulation. And that's what I'm struggling with.