Differences in social and public risk perceptions and conflicting impacts on point/nonpoint trading ratios

If stochastic nonpoint pollution loads create socially costly risk, then an economically optimal point/nonpoint trading ratio-the rate point source co ntrols trade for nonpoint controls-is adjusted downward (a risk reward for nonpoint controls), encouraging more nonpoint controls. However, in actual trading programs, ratios are adjusted upward in response to nonpoint uncert ainties (a risk premium for nonpoint controls). This contradiction is expla ined using a public choice model in which regulators focus on encouraging a batement instead of reducing damages. The result is a divergence of public and social risk perceptions, and a trading market that encourages economica lly suboptimal nonpoint controls.