chapter 12: the political economy of environmental regulation

Question 1

Two obstacles to effective government regulation of pollution:

Answer 1

1. imperfect information
2. the opportunity for political influence

Question 2

3 steps of the generic regulatory processes

Answer 2

1. Passage of a law by congress and the president
2. Drafting of regulations by the EPA
3. Implementation and enforcement by state officials

Question 3

judicial model of regulation

Answer 3

Regulations can be challenged in court
Regulatory process an be influenced at dozens of points prior to legal challenge
Reduces bureaucratic discretion
Can lead to regulatory gridlock

ex US regulatory model

Question 4

reporting bias

Answer 4

When the government is forced to rely on outside government groups (industry, environmental groups, universities etc) for data about costs and benefits, there is a risk that costs and benefits will be over or understated based on the biases/ goals of the group.

limited resources –> reporting bias –> imperfect information –> bureaucratic discretion –> opportunity for political influence

Question 5

2 ways to adress reporting bias

Answer 5

1. Improve in-house analysis
2. Rely on incentive-compatible regulation

Question 6

What are the three bureaucratic motivations and what impact to they have on regulation

Answer 6

1. agency building
   - tends to lead to over-regulation
2. external career building (ie revolving door)
   - tends to lead to under-regulation
3. job satisfaction
   - can lead to either under or over regulation depending on the persons ideology: the exercise of power (over-regulation) or the maintenance of a quiet life (under-regulation)

Question 7

the revolving door

Answer 7

many people working in environmental agencies go on to work for firms in the industries they regulate

Question 8

What is the main political resource of environmentalists?

Answer 8

votes

Question 9

what is the main political resource of industry

Answer 9

dollars

Question 10

How can industry use their dollars?

Answer 10

1. fund technical studies
2. hire lobbying staff
3. promise bureaucratics future jobs
4. gain access to decision-makers
5. advertising to gain votes

Question 11

why is political influence a zero sum game?

Answer 11

environmentalists and industry are caught in a zero sum game since one party can only gain by influencing policy at the expense of another. The prisoner’s dilemma model suggests that competition for political influence leads to overinvestment in unproductive competition.

Question 12

How can influence in the political process be reduced through political reform?

Answer 12

1. eliminating the tax-deductible status of lobbying
2. sunshine laws
3. lobbying restrictions for former government officials

Question 13

environmental federalism

Answer 13

moving more responsibility for regulation to the state level

Question 14

regulatory capture

Answer 14

the regulated industry gains control of the agency designed to regulate it in the public interest

Question 15

demand for environmental protection requires

Answer 15

1. access to informaiton
2. effective and widespread democracy