Airing Your Dirty Laundry: A Quick Marketable Pollution Permits Game for the Classroom

Abstract

In this article, the authors describe a simple classroom game that demonstrates the advantage of tradable emissions permits in regulating environmental pollution. Students take on the role of polluters who must consider the costs of complying with a uniform reduction and a tradable permits program. The class is divided into high-cost polluters and low-cost polluters so students can observe the gains from trade as high-cost students purchase pollution rights from the low-cost students in the tradable permits scenario. A major advantage of the game is that it can be conducted within as little as 20 minutes and does not require that students have prior knowledge of economics or regulatory policies. This makes the game appropriate for economics and noneconomics courses alike.

Keywords:

• classroom games
• pollution
• principles of economics
• tradable emissions permits

• JEL codes A21
• A22
• Q52
• Q53
• Q58

Notes

¹Furthermore, Lewis (2011) provided a framework for the purchase of actual pollution permits in an environmental economics course.

²The handout is to be printed out with the high- or low-cost option and the $5 or $1 costs, respectively, to create the two handouts referenced in this article.

³We find that using paper money slips simplifies transactions in the permits scenario. Alternatively, the instructor can announce to the class that each student has $20 “in a bank account” and that after any purchases or sales, any debits or receipts should be reflected in an updated account balance.

⁴As pointed out by a reviewer, the game may be effectively played by placing students in pairs with pollution equaling the sum of the dark clothing items across the two members. We have not played the game in this fashion, but our experience has been that a significant portion of students do check and compare their work with table partners, suggesting that pairing students may streamline game play.

⁵In practice, we have allowed students to negotiate from their seats and trade with nearest neighbors. With only two cost types that are evenly mixed throughout the class, it is not necessary for students to get up and mingle (as in a trading pit) to identify profitable trades. However, the extent and range of trades does increase when students are able to get up and trade among all members of the class.

⁶In this particular class, the total cost of cleanup using a uniform standard was $81. In the first round of tradable permits, total cost fell to $37, and in the second round of tradable permits, this cost rose to $43.