Though the presidential campaign is now in full swing, there seem to be more candidates than issues -- at least where economic policy is concerned. The reason for the dearth of issues is clear enough: most candidates think it impolitic to base a campaign on how best to pare the budget deficit. And until that is done, major new spending programs are fanciful. Such is the legacy of Ronald Reagan.

The candidates' reluctance to join the deficit debate stems from polling results showing that voters favor a smaller budget deficit, but relish neither higher taxes nor lower spending. Such public contempt for the laws of arithmetic makes deficit reduction a political loser. Candidates fear that proposing specific tax increases or spending cuts invites electoral disaster. Such is the legacy of Walter Mondale.

So let me offer an economic issue to any candidate who wants one. The program I suggest is politically popular, will not cost the government a dime and, if pursued properly, will actually raise some revenue. What is this godsend? None other than resuming the interrupted drive for a cleaner environment -- but using market incentives to do the job.

Wait, you object, wouldn't stiffer environmental regulations impose higher costs on business? Yes, they would. That is precisely why we should rely on incentives. By slashing the costs of pollution abatement, a market-oriented approach makes it possible to get a cleaner environment, nibble away at the deficit and ease the regulatory burdens on business all at the same time.

To understand how such wonders are possible, compare what society does to get cleaner air and water with what it does to get more of some ordinary good.

When we want, say, 10 percent more gadgets, we put the market system to work. A rise in demand increases the price of gadgets. Individual manufacturers respond as they see fit, without central direction. Some boost production much more than 10 percent, some not at all. In total, output rises enough to meet the higher demand.

We never think of adopting what might be called the Soviet solution -- ordering every gadget factory to raise its output by 10 percent -- because it is so inefficient. The market naturally assigns the lion's share of the job of raising production to the most efficient firms, because they are the ones that can get the goods to customers most cheaply (and therefore most profitably). The Soviet solution parcels out the work in some other, less efficient, way -- such as equal percentage increases.

But when it comes to cleaning up our environment, we shun the market and adopt the Soviet solution by ordering particular polluters to reduce their emissions by particular amounts. Often, we even prescribe the technology. This command-and-control approach makes pollution abatement needlessly expensive for the same reason that Soviet-style planning makes gadgets too expensive. Markets, not regulators, know how to assign the task of pollution abatement to the firms best able to do it.

Here's how a market approach to environmental protection might work:

Suppose society decides that only 10 million tons of the unsightly pollutant "glop" would be emitted into the atmosphere each year. Ten million permits, each permitting one ton of glop per year, would be created. Some of these permits would presumably be given away free, just as current regulations allow low levels of pollution without penalty. The rest would be sold at auction, with the proceeds going to the government. Firms would be allowed to trade the permits freely at market-determined prices.

The prices would determine which firms reduce emissions and by how much. Suppose the price of a glop permit settled at $500. Any firm that could cut its glop emissions by a ton by spending less than $500 would do so rather than buy an expensive permit. Any firm whose costs of pollution abatement exceeded $500 per ton would buy a permit instead. Thus low-cost firms would do the cleanup while high-cost firms would buy the permits.

Can society save much in this way? You bet it can. Estimates of potential cost savings in particular instances range from under 10 percent (which is hardly exciting) to over 90 percent (which is). Since America now spends about $70 billion annually on pollution abatement, the nation could easily save $20-$30 billion per year and perhaps more. Alternatively, we could use the same $70 billion annually to buy a much cleaner environment.

Legislation may not even be required, thanks to the Environmental Protection Agency's "bubble" program. Under the bubble concept, all sources of pollution from a single plant or firm are imagined to be encased in a mythical bubble. The EPA tells the company how much it may emit into the bubble, but lets the company decide how to comply. Some spectacular cost savings have been achieved. But bubbles are still rare because the program was made permanent only last November.

A bubble is essentially an emissions permit that is not bought and may not be sold. Hence it is but a small step from bubbles to marketable emissions permits -- a step that would reduce the costs of a job America wants done.

The writer is a professor of economics at Princeton University.