Four legal approaches may be followed in at-
tempting to channel technological development
in socially useful directions: specific directives,
market incentive modifications, criminal prohi-
(5) bitions, and changes in decision-making struc-
tures. Specific directives involve the govern-
ment’s identifying one or more factors control-
ling research, development, or implementation
of a given technology. Directives affecting such
(10) factors may vary from administrative regulation
of private activity to government ownership of a
technological operation. Market incentive modi-
fications are deliberate alterations of the market
within which private decisions regarding the
(15)development and implementation of technology
are made. Such modifications may consist of
imposing taxes to cover the costs to society of a
given technology, granting subsidies to pay for
social benefits of a technology, creating the right
(20) to sue to prevent certain technological develop-
ment, or easing procedural rules to enable the
recovery of damages to compensate for harm
caused by destructive technological activity.
Criminal prohibitions may modify technological
(25) activity in areas impinging on fundament soc-
ial values, or they may modify human behavior
likely to result from technological applications—
for example, the deactivation of automotive
pollution control devices in order to improve
(30) vehicle performance. Alteration of decision-
making structures includes all possible modifica-
tions in the authority, constitution, or responsi-
bility of private and public entities deciding
questions of technological development and
(35) implementation. Such alterations include the
addition of public-interest members to corporate
boards, the imposition by statute of duties on
governmental decision-makers, and the exten-
sion of warranties in response to consumer
(40) action.
Effective use of these methods to control
technology depends on whether or not the goal
of regulation is the optimal allocation of
resources. When the object is optimal resource
(45) allocation, that combination of legal methods
should be used that most nearly yields the allo-
cation that would exist if there were no external
costs resulting from allocating resources through
market activity. There are external costs, when
(50) the price set by buyers and sellers of goods fails
to include some costs to anyone, that result
from the production and use of the goods. Such
costs are internalized when buyers pay them.
Air pollution from motor vehicles imposes
(55) external costs on all those exposes to it, in the
form of soiling, materials damage, and disease,
these externalities result from failure to place a
price on air, thus making it a free good, com-
mon to all. Such externalities lead to nonopti-
(60) mal resource allocation, because the private net
product and the social net product of market
activity are not often identical. If all external-
ities were internalized, transactions would occur
until bargaining could no longer improve the
(65) situation, thus giving an optimal allocation of
resources at a given time.
17. The passage is primarily concerned with
describing
(A) objectives and legal methods for directing
technological development
(B) technical approaches to the problem of
controlling market activity
(C) economic procedures for facilitating trans-
actions between buyers and sellers
(D) reasons for slowing technological develop-
ment in light of environmentalist
objections
(E) technological innovations making it
possible to achieve optimum allocation
of resources
18. The author cites air pollution from motor
vehicles in lines 54-56 in order to
(A) revise cost estimates calculated by including
the costs of resources
(B) evaluate legal methods used to prevent
technological developments
(C) give examples of costs not included in
buyer-seller bargains
(D) refute hypotheses not made on the basis of
monetary exchange values
(E) commend technological research under-
taken for the common welfare
19. According to the passage, transactions between
private buyers and sellers have effects on society
that generally
(A) are harmful when all factors are considered
(B) give rise to ever-increasing resource costs
(C) reflect an optimal allocation of natural
resources
(D) encompass more than the effects on the
buyers and sellers alone
(E) are guided by legal controls on the develop-
ment of technology
20. It can be inferred from the passage that the
author does NOT favor which of the following?
(A) Protecting the environment for future use
(B) Changing the balance of power between
opposing interests in business
(C) Intervening in the activity of the free
market
(D) Making prices reflect costs to everyone in
society
(E) Causing technological development to
cease
21. A gasoline-conservation tax on the purchase of
large automobiles, with the proceeds of the tax
rebated to purchasers of small automobiles, is
an example of
(A) a specific directive
(B) a market incentive modification
(C) an optimal resource allocation
(D) an alteration of a decision-making structure
(E) an external cost
22. If there were no external costs, as they are
described in the passage, which of the following
would be true?
(A) All technology-control methods would be
effective.
(B) Some resource allocations would be illegal.
(C) Prices would include all costs to members
of society.
(D) Some decision-making structures would be
altered.
(E) The availability of common goods would
increase.
23. The author assumes that, in determining what
would be an optimal allocation of resources, it
would be possible to
(A) assign monetary value to all damage
resulting from the use of technology
(B) combine legal methods to yield theoretical
optimum
(C) convince buyers to bear the burden of
damage from technological developments
(D) predict the costs of new technological
developments
(E) derive an equation making costs depend on
prices
24. On the basis of the passage, it can be inferred
that the author would agree with which of the
following statements concerning technological
development?
(A) The government should own technological
operations.
(B) The effects of technological development
cannot be controlled.
(C) Some technological developments are
beneficial.
(D) The current states of technological
development results in a good allocation of
resources.
(E) Applications of technological development
are criminally destructive.
17.A 18.C 19.D 20.E 21.B 22.C 23.A 24.C
