Regulation as a Dynamic Macroeconomic Enterprise
Reposted from RegBlog.
Traditionally, the field of law and economics has treated government regulation as if it were a mere transaction. This microeconomic approach to law assumes that government regulators should aim to make their decisions efficient by seeking to equate costs and benefits at the margin.
As I argue in a new book, The Economic Dynamics of Law, the microeconomic model of government regulation misconceives the essence of regulation. Government regulation produces not an instantaneous transaction, but a set of rules intended to influence future conduct, often for many years. Accordingly, regulation provides a framework for private resource allocation, rather than allocating the resources itself. This framework performs a macroeconomic role by reducing systemic risks that might permanently impair important economic, social, and natural systems. As such, government regulation resembles monetary policy, which likewise affects, but does not control, resource allocation. 
Properly understood, the relationship between law and the economy implies that private actors can ameliorate the effects of nominally inefficient government decisions. Capitalism works precisely because government cannot assimilate sufficient information to make perfectly efficient decisions. Yet, the neoclassical model of law and economics assigns government the efficiency-enhancing role that properly belongs to private actors.
In The Economic …
NEW DELHI — Here’s what monsoon season looks like in India. This summer, the northern states have been lashed with rain. In the northeastern state of Assam, July rains swamped thousands of homes, killing 65 residents. Floods and mudslides in northeast India sent nearly 6 million people heading for the hills in search of temporary housing (a tarp, a corrugated roof) and government aid (when they can get it). In New Delhi, the monsoon hasn’t caused anything nearly as traumatic. But one cloudburst can easily flood roads and storm canals, sending bubbling streams of grease and sewage across the urban slums.
Haven’t heard about all this? Normally, I wouldn't have either. But this semester I’m living in New Delhi, near one of those storm canals, working as a Fulbright-Nehru Research Scholar affiliated with India’s Centre for Policy Research (another “CPR”). My plan …
A draft of the Republican party platform, posted by Politico on Friday afternoon, reveals that the party has incorporated some of the more absurd claims and proposals on regulations pushed by House Republicans and some more radical trade organizations.
The draft claims regulations cost $1.75 trillion each year – that’s from a discredited study sponsored by the Small Business Administration’s Office of Advocacy. It turned out that 70 percent of that figure came from a regression analysis based on opinion polling on perceived regulatory climate in different countries (and much of the rest of the number came from cherry-picking the highest available estimates). The SBA study was debunked by a CPR white paper, the non-partisan Congressional Research Service, and the Economic Policy Institute (twice).
The draft platform says: “Constructive regulation should be a helpful guide, not a punitive threat.” In other words, we suggest that …
Today CPR releases a new briefing paper explaining how states can spearhead improving energy efficiency standards for home appliances. The paper, States Can Lead the Way to Improved Appliance Energy Efficiency Standards, draws on ideas discussed in Alexandra B. Klass’s article State Standards for Nationwide Products Revisited: Federalism, Green Building Codes, and Appliance Efficiency Standards. I co-authored today’s paper with CPR Member Scholars Klass and Lesley McAllister.
Traditionally a strongly bipartisan issue, support for energy efficiency has been eroded by anti-regulation sentiments. Without strong political support or adequate resources, the Department of Energy (DOE) has struggled to promulgate adequate efficiency standards. Regulatory efforts at the federal level have come up short, resulting in weak and delayed standards, or often no standards at all. In the absence of a dramatic shift in political will at the federal level, the most effective way to bring about improved …
Based on what the Romney-Ryan team has said so far on energy, I expected their energy plan today would be something like the National Energy Policy of 2001, delivered by Vice President Dick Cheney four months after George W. Bush’s inauguration. I thought that their energy plan would simply be a retread of old thinking, much like their education policies. But today’s plan goes to a whole new level.
The 2001 plan, famously developed behind closed doors, predicted a 30% growth in energy demand by 2020, increased dependence on foreign oil, and an increased gap between domestic production and demand, all contributing to the need for greater domestic energy production. After reading the Romney-Ryan plan, I have (and I do not believe that I am saying this) a little nostalgia for the Cheney Plan, for two reasons. First, even though the Cheney’s task force …
Cross-posted from Triple Crisis.
Can we protect the earth’s climate without talking about it – by pursuing more popular policy goals such as cheap, clean energy, which also happen to reduce carbon emissions? It doesn’t make sense for the long run, and won’t carry us through the necessary decades of technological change and redirected investment. But in the current context of climate policy fatigue, it may be the least-bad short-run strategy available.
You may have lost interest in climate change, but the climate hasn’t lost interest in you. Once-extraordinary heat waves are becoming the new normal. Recent research demonstrates that by now someone “old enough to remember the climate of 1951–1980 should recognize the existence of climate change, especially in summer.”
Despite evidence of a worsening climate, the repeated failure of climate negotiations is sadly predictable. Real climate solutions require international cooperation, but …
Yesterday afternoon, the D.C. Circuit Court of Appeals issued a long-awaited decision on the validity of EPA’s “Cross-State” rule governing interstate transport of pollution.
The EPA has been trying for more than two decades to come up with a solution to the vexing interstate transport problem, but every attempt has failed. The court has now vacated EPA’s most recent (and most ambitious) attempt to protect the residents of “downwind” states (primarily in New England and the mid-Atlantic) from two pollutants (ozone and fine particulate matter) that can cause a number of adverse health effects, ranging from minor eye irritation to premature mortality. EPA’s rule was estimated to prevent 13,000 to 34,000 premature deaths every year.
Worse, the court interpreted the Clean Air Act in a way that ensures that EPA may never be able to implement it with the analytical tools …
Earlier this month, the Senate Finance Committee reported out a bill that would extend production tax credits for the wind industry, in addition to providing other tax benefits for the construction of new energy-efficient homes, energy efficient appliances, and biofuels. These are all positive efforts that serve as investments in the necessary transition to a clean energy future. Yet meanwhile, the Presidential campaign rhetoric on this issue, and on energy policy more broadly, is as predictable as it is disappointing.
Governor Romney came out in “firm opposition” to extending production tax credits to the wind industry even though Republican Senators, such as Chuck Grassley, co-sponsored the tax legislation that passed the Senate committee with a 19-5 bipartisan vote. It is equally unsurprising that conservative groups such as the Club for Growth applaud Romney for his "courage" to oppose tax credits and to stand up to claims about …
Around the country, a disproportionate number of facilities and operations that discharge sewage, process hazardous waste, and emit toxic air pollution are located in areas with high poverty rates or large minority populations. Environmental regulation that has reduced overall pollution has often failed to do so equitably, leaving (or in some cases even increasing) environmental risks in certain neighborhoods. These communities suffer from environmental harms in far greater numbers than the general population as dirty air, polluted water, and contaminated soils have been relocated to their neighborhoods, or left in operation as facilities in other areas are cleaned up or closed. Sadly, for a long time, environmental justice for the marginalized members of our society has been a low priority for many activists and regulators alike.
Environmental injustices can also be the result of market-based environmental protection schemes that prioritize economic incentives while ignoring hard-to-quantify externalities. Allowing …
Last week, President Obama’s campaign earned green criticism for airing a radio ad in Ohio that portrayed the President as pro-coal, and Mitt Romney as anti-coal. The ad asserted that Obama has been good for the coal industry, and then said:
And Mitt Romney? He’s attacking the president’s record on coal. But here’s what Romney said in 2003, at a press conference in front of a coal plant: “I will not create jobs or hold jobs that kill people. And that plant, that plant kills people.” So when it comes to coal, ask yourself, who’s been honest and who’s playing politics?
The ad was certainly saying Romney’s 2003 quote was a bad thing, which understandably infuriated environmental groups. But the way the contrast is set up in the last sentence, there's sufficient wiggle room to argue that the ad …
