We don’t live in a perfect world. When gas taxes are out and all we have are fuel economy standards, that’s a second-best solution to tackling emissions from driving. When carbon taxes are out and all we have is political hot air, that’s far from first-best, too.
Sometimes, however, one imperfection may well cancel out another. Monopolists distort markets. They charge more and produce less than the free market would. That’s bad news. But if the monopolist happens to own a particularly polluting mine, charging more and producing less is exactly what you want. Break up the monopoly and pollution increases.
Double whammies may not be that bad after all.
