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From the standpoint of efficiency, there is a lively controversy in envi- ronmental economics concerning whether the distribution of liability for envi- ronmenta 1 damage even matters. A famous paper by Coase (1960) argued (in a pollution context) that in perfect markets, the allocation of resources would be the same regard less of whether polluters must compensate others for the damages caused or whether they must be "bribed" to reduce their output of pol- lution. Several objections to this position have been voiced: that markets are not frictionless and transactions are difficult to arrange (Kneese, 1964), that the analysis ignores income effects (Page, 1973), and that in any case, a bribery scheme creates perverse incentives for polluters (Herfindahl and Kneese, 1974). Imagine what would be likely to happen, for example, if the government had to compensate private developers for projects that were halted or amended to prevent damage to endangered spec ies . Deve lopers would then have an interest in claiming to build such projects even if they had no real plans to do so. As a practical matter, these conflicts are mitigated somewhat by the fact that the projects affecting endangered species are as a rule so large that they are often undertaken by the government or by large corporations. This tends to equate those who benefit and those who pay, and even when it does not, it spreads the burden of endangered species protection over a larger group so that the impact on anyone individual is likely to be small. B. The Endangered Species Act of 1973 (P.L. 93-205) This Act modified previous endangered species protection legislation in several significant ways. First, for the first time, regulatory authority was given to the Secretary of the Interior for the preservation of endangered spe- cies within the United States. It was made unlawful to "take" an individual member of an endangered species where "take" is defined in the Act as "to harass, harm, pursue, hurt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in such conduct-" Thus, direct actions against endangered species were prohibited. Second, the Act established formal categories for "endangered" and "threatened" species together with criteria for determining inclusion in a List of Endangered and Threatened Species. Although species listed as "threatened with extinction" pursuant to the 1966 and 1969 Acts were automati- cally made members of this list, additions to it were a matter of rulemaking. 9