Center for Business and Government, John F. Kennedy School of Government
This paper provides an economic perspective of environmental law and policy with regard to both normative and positive dimensions. It begins with an examination of the central problem in environmental regulation: the tendency of pollution generators in an unconstrained market economy to externalize some of the costs of their production, leading to an inefficiently large amount of pollution. The paper examines in detail the means of environmental policy, that is, the choice of specific policy instruments, beginning with an examination of potential criteria for assessing alternative instruments, with particular focus on cost-effectiveness. The paper also addresses the question of how environmental responsibility is and should be allocated among the various levels of government. The authors provide a positive review of the responsibilities of federal, state, and, local levels of government in the environmental realm, plus a normative assessment of this allocation of regulatory responsibility. They focus on three arguments that have been made for federal environmental regulation: competition among political jurisdictions and the race to the bottom; transboundary environmental problems; and public choice and systematic bias.
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