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Hajin's dissertation research considers norms of corporate social responsibility and potential moral and psychological differences between price and quantity regulations.
The goal of the current tariffs, and of the price and quantity regulations that could replace them, is to protect American and European manufacturers from what they and the Obama administration describe as unfair competition.
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Louis Kaplow & Steven M. Shavell, On the Superiority of Corrective Taxes to Quantity Regulation, 4 Am.
Moreover, quantity regulation is relatively easy to implement through leverage restrictions.
To deal with the externalities of shadow banking, we advocate quantity regulation.
See: E. Sheshinski, "Price, Quality, and Quantity Regulation in a Monopoly Situation," Economica, May 1976, pp. 127 137; White (Autumn 1972).
In this case however, a corrective tax schedule (equal to the expected harm schedule) is superior to quantity" regulation.
" Another argument, associated with Baumol and Oates (1988), is that quantity regulation gains" appeal when the state is uncertain about the harm caused by an externality.
" In recent years, however, many economists seem to have adopted the view that either corrective" taxes or quantity regulation could be superior to the other.
Moreover, because systemic risk cannot be accurately measured and priced, we argue that the externalities of shadow banking should be limited through quantity regulation — restrictions on the size of shadow banking – rather than taxation.
Corrective taxes are indeed superior to quantity" regulation if -- as seems more plausible -- the state can impose a nonlinear tax equal to the" schedule of harm or can adjust the tax rate upon learning that it diverges from marginal harm.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com