text: At this point, the individual firm is forced to ask whether its gains from current production are sufficient to justify the heavy damages that it must pay to others. Often that answer is no, so that the firm will then voluntarily cut back on its emissions to minimize the sum of three variables: the cost of pollution, the cost of pollution prevention, and the administrative costs of making these calculations. If the costs of pollution are correctly set, the firm will make the right social decision on its own initiative.