12 - . Federalism and Environmental Protection: Theory...

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. Federalism and Environmental Protection: Theory There are three key theoretical questions: 1. Choosing the extent of environmental control 2. Deciding on the methods of pollution control to use 3. Determining and funding the basic research agenda for an environmental problem Choosing the extent of environmental control -- which level of government will choose the most efficient level of environmental protection? Some key considerations are: 1. Externalities – do the costs and benefits extend beyond the jurisdictional boundaries of a state or local government? If so, centralized would be better. The answer is clear when there are no externalities, or when externalities are significant (e.g. SO 2 and acid rain), but what about when externalities are small (e.g. how much space should a town give to a new park – some people from outside the town will enjoy it)? Advantages of localized decision making when externalities are small: Localities can take advantage of unique factors. Because tastes differ, the end result is different types of communities, so that individuals can sort themselves by preferences. Most standards set minimum, not maximum, levels of control. Therefore, welfare losses occur in communities with preferences for less control. Other types of externalities: Intergenerational – ability of local government to consider future generations depends on whether future benefits affect property values or whether government thinks local residents might move before enjoying benefits. Safety externality – if people are paternalistic, they might want to protect citizens in other jurisdictions. 2. Information – which level of government has the most information about the costs and benefits of reducing pollution? In general, federal government has better information about basic health and environmental effects of pollution. Local governments have better information about unique local conditions. Preferences Demographic characteristics (e.g. number of elderly or children who will suffer more from air pollution) Factors affecting costs of compliance (e.g. local labor rates) Geographic or biophysical concerns (e.g. type of fish in local water) However, the federal government can transmit general information to local governments, giving local governments an advantage. When externalities are present, there is a tradeoff, since the federal government better for dealing with externalities, but local governments have more information.
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3. The costs of decision making – Does choosing a standard entail large decision making costs? If so, centralized solution better. The federal government can take advantage of economies of scale.
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This note was uploaded on 04/05/2012 for the course ECON 332 taught by Professor Hilarysigman during the Fall '11 term at Rutgers.

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12 - . Federalism and Environmental Protection: Theory...

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