Consider the following situation. The production and use of a certain pesticide poses both health and environmental risks to the workers who make the pesticide, those who use it, and the environment. The government regulates certain aspects of its production and distribution and limits its use and release into the environment. These control measures require the manufacturer to pay considerable monitoring and compliance costs, and require users and transport companies to take expensive precautions around its use and transport.
The government is considering a total ban on the production and use of the pesticide. In evaluating the social costs and benefits of the ban, you recognize that the manufacturer, distributors, and users will save substantial amounts because they will no longer need to monitor and control the production and use of the pesticide.
(a) In general terms, what do you consider to be the social benefits of the ban? What are the social costs?
(b) In computing the overall social costs of the ban, is it reasonable to deduct from other social costs the savings arising from not having to monitor and control the pesticide's production and use? Why, or why not?