11. The political economy of environmental regulation Flashcards
What are the two primary obstacles to effective government regulation of pollution?
- imperfect information
- the opportunity for political influence
What are the steps in the process of environmental regulation?
There is an environmental problem
Step 1 - US congress passes a bill - drafted and modified it is often vague and contradictory
Step 2 - EPA drafts regulations - define some of the vagueness, specify limits, determine costs and seek feedback.
Step 3 - State Governments implement and enforce regulations
The US currently relies on a judicial model of regulation, what result does this have?
It reduces bureaucratic discretion and also can lead to regulatory gridlock.
What is reporting bias and how doe regulators deal with this in drafting regulation?
Data often reflects a particular view or status. So to address it regulators can:
- improve in-house analysis
- rely on incentive-compatible regulation
How does reliance on incentive-compatible regulation help reduce reporting bias?
By relying on incentive compatible regulation and taxing the pesticide, firms will have an incentive to understate rather than overstate their control costs.
Imperfect information gives rise to bureaucratic discretion in drafting and enforcing regulation. What are three areas of bureaucratic discretion?
1) agency building / growth - to protect and enlarge the agency
2) external career building - the revolving door careful of their own careers
3) job satisfaction - which can depend on ideology, the exercise of power and the maintenance of a quiet life
Where there is bureaucratic discretion, there is opportunity for political influence. What two political resources are wielded by environmental groups and industry?
1) votes - environmentalists are more trusted about environmental issues than industry and govt officials and this translates into votes.
2) dollars - are useful for buying a number of items.
What can dollars buy that will lead to bureaucratic discretion?
1) technical studies
2) lobbying staff
3) access to decision makers
4) votes
The prisoners dilemma model suggest that competition for political influence is a zero-sum game leading to an over investment in lobbying. What Political reforms might reduce this wasted effort?
1) adopt a corporatist model of regulation; or
2) campaign finance reform; or
3) introduce more environmental federalism.
What is a corporatist model of regulation and why will it reduce the wasted effort of political influence?
Regulations are explicitly decided in a bargaining context between representatives of the corporate groups, the EPA, private firms and environmental organisations.
What is campaign finance reform and why will it reduce the wasted effort of political influence?
This could serve to reduce efforts by all sides to gain advantage. Eg If excess resources are being devoted to influencing the political process a straight forward response would be to raise the cost by eliminating the status that lobbying now holds as a tax deductible business expense.
What is environmental federalism and why will it reduce the wasted effort of political influence?
This suggests moving more responsibility for regulation to the state level and brings issues closer to those affected by them and reduces the influence of Washington-based interests.
What is the case against environmental federalism?
Competition between states for business will lead to lower overall levels of environmental protection
The Communist experience illustrates the potential for massive government failure in the regulatory process. Such failure is most likely when citizens are unable to express their political demand for environmental regulation. For this to occur what two things are required?
1) access to information; and
2) effective and widespread democracy
