In dealing with environmental questions, economists emphasize efficiency, social welfare, and the need for cost accountability. A basic principle for efficiency is that all costs be borne by the entity who generates them in production or consumption. For example, production and consumption of diesel fuel will be socially inefficient if significant resulting costs are shifted to others who happen to be downwind or downstream from the refinery that makes the fuel or the truck that burns it. The benefits of making and using the fuel should exceed the cost—society at large—or else the process reduces total social welfare.

Information is the key to such internalizing "external costs." If the generator of pollution damage is known, along with the victim and the size of the damage, then the polluter can be held accountable. Historically, if wrongful damage is done, courts in the United Kingdom, the...