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Environmental-Law-Revesz-Fall06 - ENVIRONMENTAL LAW FALL...

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ENVIRONMENTAL LAW FALL 2006 RICKY REVESZ I. E CONOMIC AND N ON -E CONOMIC P ERSPECTIVES a. The economic perspective i. Normative goal of the economic perspective: maximize social welfare. Environmental regulations justified only if they increase welfare of benefitted parties more than they decrease welfare of burdened parties. 1. Goal isn’t to reduce pollution to the lowest possible level, eliminate adverse consequences of pollution, etc. but rather to maximize social welfare. A reduction in pollution is socially advantageous only if it increases the welfare of the benefited parties more than it decreases the welfare of burdened parties. ii. Postive/descriptive aspect : divergence bw polluter’s private costs and the social costs imposed by his activity. If a polluter is not required to “purchase” goods like air, clean water, etc., then others will bear the costs of his activities. 1. What are private costs? Inputs (labor, iron, energy, etc.). 2. What are social costs? The pollution you emit into the air (essentially, you buy clean air). This doesn’t cost the polluter, but it does cost someone. Rational polluter will not self-regulate: will produce through mix of inputs that maximizes profit. a. External costs (externalities) b. Social object of regulation often described as internalizing this externality . iii. Attitudinal aspect : Does not view pollution as morally wrong, but rather as a natural result of the pursuit of self-interest by rational actors. No moral valuation of pollution. Not necessarily that economic perspective values free market over regulation. Quarrel here is with the regulatory scheme that does not monetize this activity. iv. Why regulate? 1. Distributional adjustments 2. Workplace context: bargaining is possible w/perfect information. Correction of informational asymmetries. 3. Internalization of externalities. v. K ey concepts 1. Tragedy of the Commons a. Rational actors seek to maximize individual gain. Increasing exploitation of a common resource has a concentrated benefit to the individual, but only a diffuse cost. Thus, he’ll do it. b. Why don’t they self-limit? i. Risk of cheating ii. Difficulty of enforcement iii. Problems of communication 1
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iv. Three problems 1. Free rider problem 2. Strategic behavior 3. Transaction costs v. Transaction costs may be higher than benefit one gets from agreement 1. Identifying interested parties. vi. When would agreements be made? 1. When you can identify parties 2. When you have repeat players 3. When the set of parties is limited 4. When the parties have social/community relationships 5. When you can price the good vii. When are resources not amenable to these types of agreements? 1. Ocean best example. viii. Solutions: 1. Taxation 2. Privatization: there are resources that can’t actually be privatized; costs associated with privatization; not every resource may be sufficiently productive to justify that cost.
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Environmental-Law-Revesz-Fall06 - ENVIRONMENTAL LAW FALL...

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