Enforcing Pollution Control Laws

Russell, Clifford S.; Harrington, Winston; Vaughn, William J.

doi:10.4324/9781315064482

Cited by 13 publications

(8 citation statements)

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“…This framework is transparent and well understood, so we do not belabor the formalism here. Becker (1968) provided the seminal law and economic treatment, Allingham and Sandmo (1972) applied the model to tax evasion, Viscusi (1979) and Smith (1979) developed early applications for OSHA and regulatory compliance, and Russell et al (1986) applied the model in a pollution context. Ruser and Butler (2010), Alm (2012), and Shimshack (2014) discuss notable extensions for OSHA, tax, and environmental compliance settings, respectively.…”

Section: The Simple Rational Actor Paradigmmentioning

confidence: 99%

Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings

Alm

Shimshack

2014

FNT in Microeconomics

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Environmental monitoring and enforcement are controversial and incompletely understood. This survey reviews what we do and do not know about the overall effectiveness, as well as the cost effectiveness, of pollution monitoring and enforcement. We ask five key questions: What do environmental monitoring and enforcement actions look like in the real world? How do we assess environmental compliance and deterrence? Do environmental monitoring and enforcement actions get results? How, why, and when do inspections and sanctions achieve compliance and reduce pollution? And, what do the answers to the preceding questions tell us about designing and implementing more effective and more cost effective public policies for the environment? A key contribution is drawing lessons from diverse sources, including insights from theoretical, empirical, and experimental contributions in environmental, tax, and safety settings. We conclude that traditional environmental monitoring and enforcement actions generate important deterrence effects. However, there are limits to such deterrence, and deterrence itself cannot fully explain all patterns of environmental behavior. Encouraging compliance requires both traditional tools and additional tools.

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Section: The Simple Rational Actor Paradigmmentioning

confidence: 99%

Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings

Alm

Shimshack

2014

FNT in Microeconomics

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“…But s, or some component of it, could be acquired first, and assessment of the firm's compliance status could be conditioned on its realization. This would be desirable when assessing the firm's compliance status is relatively costly, as is true for some environmental regulations (e.g., see Russell et al 1986 This term must also have a positive sign given (10). Thus, the magnitude of the difference (1/m * − 1/m * ) is further increased.…”

Section: Discussionmentioning

confidence: 99%

“…Even in the U.S., studies of enforcement find evidence of selective enforcement in a range of regulatory settings. For example, guidelines for enforcement of water pollution regulations, explicitly recommend that agencies be willing to forgive short-term violations, and that criminal fines be reserved for willful or negligent violations (Russell et al 1986, Chapter 3, and Code of Federal Regulations 2004). 2 In this paper, I show that a simple deterrence-based model of regulatory enforcement can be extended to allow for selective enforcement that takes into account a firm's efforts to comply.…”

Section: Introductionmentioning

confidence: 99%

The Desirability of forgiveness in regulatory enforcement

Malik

2014

J Regul Econ

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I present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a firm's compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a firm's compliance activities constitutes sufficiently strong evidence of the firm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the firm needs to be monitored. If fines are costly, a further benefit is a reduction in fine costs.

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“…Malik ( 19 ) notes that “existing environmental regulations frequently require firms to ‘self‐report’ their compliance status to regulatory agencies”; see also Russell et al ( 55 ) and Helland, ( 56 ) who suggests that “the main avenue by which firms demonstrate their desire to cooperate with regulators is by disclosing violations without being inspected.” Interestingly, reliance on self‐reporting is apparently more common for water pollution and releases of toxic and/or hazardous chemicals than for air pollution, ( 55 ) perhaps because of the greater cost and difficulty of using routine monitoring to detect such releases.…”

Section: Environmental Regulation As a Principal‐agent Problemmentioning

confidence: 99%

Should the Model for Risk‐Informed Regulation be Game Theory Rather than Decision Theory?

Bier

Lin

2012

Risk Analysis

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Risk analysts frequently view the regulation of risks as being largely a matter of decision theory. According to this view, risk analysis methods provide information on the likelihood and severity of various possible outcomes; this information should then be assessed using a decision-theoretic approach (such as cost/benefit analysis) to determine whether the risks are acceptable, and whether additional regulation is warranted. However, this view ignores the fact that in many industries (particularly industries that are technologically sophisticated and employ specialized risk and safety experts), risk analyses may be done by regulated firms, not by the regulator. Moreover, those firms may have more knowledge about the levels of safety at their own facilities than the regulator does. This creates a situation in which the regulated firm has both the opportunity-and often also the motive-to provide inaccurate (in particular, favorably biased) risk information to the regulator, and hence the regulator has reason to doubt the accuracy of the risk information provided by regulated parties. Researchers have argued that decision theory is capable of dealing with many such strategic interactions as well as game theory can. This is especially true in two-player, two-stage games in which the follower has a unique best strategy in response to the leader's strategy, as appears to be the case in the situation analyzed in this article. However, even in such cases, we agree with Cox that game-theoretic methods and concepts can still be useful. In particular, the tools of mechanism design, and especially the revelation principle, can simplify the analysis of such games because the revelation principle provides rigorous assurance that it is sufficient to analyze only games in which licensees truthfully report their risk levels, making the problem more manageable. Without that, it would generally be necessary to consider much more complicated forms of strategic behavior (including deception), to identify optimal regulatory strategies. Therefore, we believe that the types of regulatory interactions analyzed in this article are better modeled using game theory rather than decision theory. In particular, the goals of this article are to review the relevant literature in game theory and regulatory economics (to stimulate interest in this area among risk analysts), and to present illustrative results showing how the application of game theory can provide useful insights into the theory and practice of risk-informed regulation.

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Enforcing Pollution Control Laws

Cited by 13 publications

References 0 publications

Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings

Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings

The Desirability of forgiveness in regulatory enforcement

Should the Model for Risk‐Informed Regulation be Game Theory Rather than Decision Theory?

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