Environmental Regulations

I chose this article because it touched on a couple of the topics that we have already discussed. http://www.cato.org/pubs/regulation/reg19n4b.html. This article, by Jonathan H. Adler, focuses on the role of environmental policies on economic actions. "One should not be surprised that economic interests lobby, litigate, and make alliances with "public interest" organizations to ensure favorable treatment for their own interests and to utilize environmental regulations to transfer wealth." - Firms use the enviroment as their transfer of wealth in order to "rent seek". However, the returns that the enviromental firms are looking for, is in the form of regulation. The article goes on to talk about how, all though regulations for the environment often seem to be in the publics interest, there are often times different motivations behind these regulations. The article explains that both the legislature and the bureaucrats are implimenting regulations that will help the public but on a side note benefit issues that are most important to them (there are plenty of specific examples in the article). "For years many academics have suggested that regulatory policies are more the result of interest-group manipulation than dispassionate consideration of the public interest. " - This articles also clearly explains the need for rents seeking and justifies it as the "only legal way to predation" and that in the envirnmental industry it is the only way to recieve the regulations that they are looking for. Adler claims that since regulations are here to stay, why shouldn't environmental firms rent seek, because often times these regulations benefit the larger plants, so the smaller ones need to find a way to keep from getting weeded out. However, when the rent seeking involves the environment, the result is different than in most cases. No matter who is doing the rent seeking, public interest or regulated firms, everyone benefits from less pollution and a regulated industry. "In fact, by their very nature, environmental regulations are conducive to rent seeking, for in the environmental context, both regulated firms and "public interest" representatives stand to gain from reductions in output and the creation of barriers to entry." So whether or not the regulation is in the interest of the public, it benefits the plant/firm regarless. The article goes on to apply the argument of using environmental policies for private interest in a number of past examples, such as the Clean Air Act of 1977 and Bush's term. Adler claims that these underlying incentives makes envirnmental politics "as polluted as the rest." This artcle touches on both Stigler and Peltzman topics. Although legislature may claim that the regulations are in the publics best interest, in environment issues, firms go looking for regulation, they want entry barriers to be created. If a coal factor offers to lower admissions in return for a form of regulation that will benefit the coal industry, then the legislature truly will never object because both the reduction in admissions and the entry barrier are going to benefit everyone. Usually there are external cost or one group gets all the benefits while everyone else reeps the costs, however when there are regulations put into place for the envirnment, the benefits are not limited to a single firm. Peltzman said that we only get regulation where we want it, and the environment is definately an area where we want regulation. However, i am not really sure who holds the power in this instence because large firms offer "transfers" that a legilature won't want to turn down in return for a regulation that is only going to give them more power. The legislature won't turn them down because we assume they are vote maximizers and since the envornment effects everyone, the 2 groups (benefit & taxed) are blurred and the legislature is paid in votes by both groups. The regulation, though not initially in the publics best interest, will benefit the public as well. However,in the situation of the environment, the rentseeking can go either way, the firms want regulations from the government and the government is willing to compromise in return for something else. Although the environment is clearly a public good, the government definately needs to step in an regulate as the envirnment has become a tool being used to impliment private interest issues. Except if the government can also benefit from some of these individual incentives, then it isn't completely regulated to fit the publics interest. As we have been talking about the principal-agent issues, it makes me wonder which part of the actual funds that have gone towards cleaning the envirnment was truly for the publics interest. The article stated that 2% of the GDP goes towads the environment, however it is difficult to determain exactly the effect of funding to the envirnment. Enjoy the aricle!!