WHEN IS COMMAND-AND-WHEN IS COMMAND-AND-CONTROL EFFICIENT ?CONTROL EFFICIENT ?Institutions, Technology and the Institutions, Technology and the

Comparative Efficienct of Alternative Comparative Efficienct of Alternative Regulatory Regimes for Environmental Regulatory Regimes for Environmental

ProtectionProtection

Peter Z. GrossmanPeter Z. Grossman

Daniel H. ColeDaniel H. Cole

COMMAND-AND-CONTROL REGIMES COMMAND-AND-CONTROL REGIMES VS. ECONOMIC FORMS OF VS. ECONOMIC FORMS OF

REGULATIONREGULATIONEconomists, Legal Scholars, and Policy-Economists, Legal Scholars, and Policy-

MakersMakers It has become an article of faith It has become an article of faith

among economists, legal scholars, among economists, legal scholars, and policy makers that economic and policy makers that economic forms of regulation such as forms of regulation such as effluent effluent taxestaxes and and emissions tradingemissions trading are are inevitably more efficient than inevitably more efficient than traditional command-and-control traditional command-and-control regimes for environmental regimes for environmental protection. protection.

ECONOMIC FORMS OF ECONOMIC FORMS OF REGULATON REGULATON

Economic Instruments # market-Economic Instruments # market-based approaches based approaches

““(w)e use the labels "economic (w)e use the labels "economic instruments" and "market-based instruments" and "market-based approaches" to regulation approaches" to regulation interchangeably, in contrast to interchangeably, in contrast to "command-and-control." "command-and-control."

!!@@???!!@@???

ECONOMIC FORMS OF ECONOMIC FORMS OF REGULATON REGULATON

Economic Instruments # market-Economic Instruments # market-based approaches based approaches

Robert Stavins & Bradley W. Robert Stavins & Bradley W. Whitehead, The Next Generation of Whitehead, The Next Generation of

Market-Based Environmental Policies Market-Based Environmental Policies 2-9 (Resources for the Future 2-9 (Resources for the Future Discussion Paper No. 97-10, 1996)Discussion Paper No. 97-10, 1996)

COMMAND-AND-CONTROL COMMAND-AND-CONTROL REGIMESREGIMES

Crítica Focada na (In)eficiênciaCrítica Focada na (In)eficiência

COMMAND-AND-CONTROL REGIMESCOMMAND-AND-CONTROL REGIMESCrítica Focada na (In)eficiênciaCrítica Focada na (In)eficiência

Some suggest that command-and-Some suggest that command-and-control regimes are not only less control regimes are not only less efficient but efficient but inherently inefficientinherently inefficient, , implying that they naturally produce implying that they naturally produce more social costs than benefits. more social costs than benefits.

COMAND-AND-CONTROL COMAND-AND-CONTROL REGIMESREGIMES

Critica Focada na RigidezCritica Focada na Rigidez "Commandand-control" is in essence a "Commandand-control" is in essence a

regulatory approachregulatory approach whereby the whereby the government government "commands""commands" pollution pollution reductions (e.g., by setting emissions reductions (e.g., by setting emissions standards) and standards) and "controls""controls" how these how these reductions are achieved (e.g., through the reductions are achieved (e.g., through the installation of specific pollution-control installation of specific pollution-control technologies).”technologies).”

"command-and-control" is synonymous with "command-and-control" is synonymous with

"technology-based command-and-control” "technology-based command-and-control” !!#??!!#??

COMAND-AND-CONTROLCOMAND-AND-CONTROLBibliografia Critica Focada na Bibliografia Critica Focada na

(In)eficiência e na Rigidez(In)eficiência e na Rigidez T.H. Tietenberg, Emissions Trading: An T.H. Tietenberg, Emissions Trading: An

Exercise in Reforming Pollution Policy 38 Exercise in Reforming Pollution Policy 38 (1985)(1985)

Richard B. Stewart, United States Richard B. Stewart, United States Environmental Regulation: A Failing Environmental Regulation: A Failing

Paradigm, 15 J.L. & Com. 585, 587 Paradigm, 15 J.L. & Com. 585, 587 (1996). (1996).

COMMAND-AND-CONTROL REGIMESCOMMAND-AND-CONTROL REGIMESDefesa à Crítica Focada na IneficiênciaDefesa à Crítica Focada na Ineficiência Standard economic accountsStandard economic accounts of command- of command-

and-control environmental regulations are and-control environmental regulations are insensitive to theinsensitive to the historical, technological, historical, technological, and institutional contextsand institutional contexts that can that can determine the comparative efficiency of determine the comparative efficiency of alternative regulatory regimes. A regime alternative regulatory regimes. A regime that is nominally or relatively efficient in a that is nominally or relatively efficient in a given set of historical, technological, and given set of historical, technological, and institutional contexts may be nominally or institutional contexts may be nominally or relatively inefficient in another contextrelatively inefficient in another context

COMMAND-AND-CONTROL REGIMESCOMMAND-AND-CONTROL REGIMESDefesa à Crítica Focada na IneficiênciaDefesa à Crítica Focada na IneficiênciaWhen analyzed with sensitivity to When analyzed with sensitivity to

historical, technological, and historical, technological, and institutional contexts, command-and-institutional contexts, command-and-control regulations are not, contrary control regulations are not, contrary to the prevailing to the prevailing

wisdom, invariably inefficient or wisdom, invariably inefficient or necessarily less efficient than necessarily less efficient than "economic" mechanisms for "economic" mechanisms for

environmental protection. environmental protection.

COMMAND-AND-CONTROL REGIMESCOMMAND-AND-CONTROL REGIMESDefesa à Crítica Focada na IneficiênciaDefesa à Crítica Focada na Ineficiência In some cases, given the In some cases, given the marginal marginal

costs of pollution controlcosts of pollution control, , technological constraintstechnological constraints, and , and

existing institutionsexisting institutions, command-and-, command-and-control can be the most efficient control can be the most efficient means of achieving a society's means of achieving a society's environmental protection goals.environmental protection goals.

COMMAND-AND-CONTROL COMMAND-AND-CONTROL REGIMESREGIMES

Crítica Focada na Ilegitimidade Crítica Focada na Ilegitimidade DemocráticaDemocrática

COMMAND-AND-CONTROL REGIMESCOMMAND-AND-CONTROL REGIMESCrítica Focada na Ilegitimidade Crítica Focada na Ilegitimidade

Democrática Democrática

A few even go so far as to equate A few even go so far as to equate command-and-control with command-and-control with "Soviet-"Soviet-style" regulationstyle" regulation and and "socialist "socialist central planning,“central planning,“ implying that it is implying that it is both both endemically inefficientendemically inefficient and and democratically illegitimatedemocratically illegitimate. .

COMMAND-AND-CONTROL REGIMESCOMMAND-AND-CONTROL REGIMESBibliografia Crítica Focada na Bibliografia Crítica Focada na

Ilegitimidade DemocráticaIlegitimidade Democrática Bruce A. Ackerman & Richard B. Stewart, Bruce A. Ackerman & Richard B. Stewart,

Reforming Environmental Law, 37 Stan. L. Rev. Reforming Environmental Law, 37 Stan. L. Rev. 1333, 1334 (1985); 1333, 1334 (1985);

Richard B. Stewart, Models for Environmental Richard B. Stewart, Models for Environmental Regulation: Central Planning Versus Market-Regulation: Central Planning Versus Market-Based Approaches, 19 B.C. Envtl. Aff. L. Rev. 547, Based Approaches, 19 B.C. Envtl. Aff. L. Rev. 547, 547 (1992)547 (1992)

Richard B. Stewart, Environmental Richard B. Stewart, Environmental Regulation and International Competitiveness, Regulation and International Competitiveness,

102 Yale L.J. 2039, 2087 (1993)102 Yale L.J. 2039, 2087 (1993)

COMMAND-AND-CONTROLCOMMAND-AND-CONTROLRessistêcia à Crítica Focada na Ressistêcia à Crítica Focada na

Ilegitimidade Democrática Ilegitimidade Democrática Pejorative labels like "Pejorative labels like "Soviet-style"Soviet-style" and and

"socialist central planning""socialist central planning" are little are little more than convenient and ideologically-more than convenient and ideologically-loaded substitutes for real arguments loaded substitutes for real arguments about the (de)merits of command-and-about the (de)merits of command-and-control. American command-and-control control. American command-and-control regulations are not comparable to regulations are not comparable to "Soviet-style" regulations or, more "Soviet-style" regulations or, more generally, to the political-economic generally, to the political-economic institutions of Marxism Leninism. institutions of Marxism Leninism.

COMMAND-AND-CONTROLCOMMAND-AND-CONTROLRessistêcia à Crítica Ressistêcia à Crítica

Focada na Ilegitimidade Focada na Ilegitimidade Democrática Democrática

For one thing, the For one thing, the label "Soviet-style"label "Soviet-style" cannot legitimately be applied to cannot legitimately be applied to regulatory programs duly enacted by regulatory programs duly enacted by democratically-elected legislatures or democratically-elected legislatures or parliaments operating according to parliaments operating according to the rule of law. the rule of law.

COMMAND-AND-CONTROLCOMMAND-AND-CONTROLRessistêcia à Crítica Ressistêcia à Crítica

Focada na Ilegitimidade Focada na Ilegitimidade Democrática Democrática

For another, the phrase For another, the phrase "socialist central "socialist central planning"planning" denotes a non-market economy denotes a non-market economy directed in its entirety by state directed in its entirety by state

planners. planners. Command-and-control environmental Command-and-control environmental

regulations in advanced industrial regulations in advanced industrial democracies, however, typically restrict democracies, however, typically restrict only a fraction of the activities occurring only a fraction of the activities occurring within predominantly market-driven within predominantly market-driven economies; they do not replace but delimit economies; they do not replace but delimit markets.. markets..