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A classic and increasingly important example of the technological externalities problem is that of a firm discharging waste into a stream, thereby inflicting damages on downstream users of the water. As long as there is no economic or legal incentive to do otherwise, the firm will ignore the effects of this action on others. It has been argued that, asymmetries in income distribution and administration aside, the levying of a charge and the payment of a bribe are symmetric means of internalizing to the firm the externality resulting from its discharge of waste into the stream. It is shown that this symmetry between bribes and charges does not hold when the cost and revenue functions are subject to change, unless these functions are known by the affected parties. Furthermore, a bribe will not only cause the firm to produce at least as much waste matter as under a charge alternative of the same cost but may even induce the firm to produce more waste matter than in the absence of a bribe or a charge. Our analysis deals with water pollution for the sake of exposition; the analysis can be extended readily to other situations giving rise to externalities. Kneese, Allen V., New directions in water management, Bull. Atomic Scientists, 21, 2-8, May

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