Positive feedback,lock-in,and environmental policy

During the last several decades, modern economic methods have been brought to bear on problems of environmental policy, with powerful and influential results. However, this policy-making paradigm often relies on some of the most restrictive sets of assumptions of microeconomics: the convexity conditions required for competitive markets to be Pareto-efficient. When positive feedback or lock-inoccurs, these assumptions do not hold, and standard economic analysis of environmental policy may lead to technologically inferior outcomes, e.g., pollution control costs that are higher than necessary. This paper considers positive feedback in several different forms, and argues that it commonly occurs in markets that affect environmental policies, such as markets for energy technologies. The discussion examines how the standard paradigm for environmental economics breaks down in the presence of positive feedback or lock-in, and considers some policy responses to this problem. The case of SO₂ trading helps illustrate how the standard paradigm can miss important technological opportunities for lower-cost pollution mitigation. The argument also suggests how the standard paradigm encourages end-of-pipe solutions and tends to overlook options like pollution prevention strategies, which can sometimes provide more economical environmental improvements.     

‘Cleaning up’ while cleaning up? Pollution abatement,interest groups and contingent trade policies

This paper analyzes the political economy of environmental-policy formation in a trading economy with established rules for administered protection. We argue that the social costs associated with the adoption of an inefficient environmental regime are likely to be compounded by induced restrictions on trade when the effected industries are import competing. The preferences of interest groups for alternative environmental regimes tend to be linked to the legal-institutional setting in which trade policy is conducted. Under existing rules and practices in the area of administered protection, there is reason to believe that interest group preferences for an inefficient approach to pollution control will be strengthened because the adoption of such a regime is more likely to lead to a concomitant increase in trade barriers.     

The Reemerging Concern over Air Pollution in China: the Smog of the State’s Efforts to Guide Public Opinion

In January 2012, Beijing began releasing air quality report of PM 2.5. The move has been credited as a major breakthrough in China’s environmental governance as it is argued that online environmental activists in China were the major driving force behind it. Since then, the issue of air pollution has reemerged as one of the hottest issues and a series of new policies addressing air pollution have been adopted. Facing a relatively new phenomenon (wumai) and heightened public concerns, to what extent is the state still capable of guiding the pubic perception and opinions about the issue? By analyzing the discourse of air pollution in People’s Daily and comparing it with public opinion survey data, the paper finds that the state’s ability to guide public opinion is rather limited, indicating that opportunities do exist for civil society to play a bigger role in China’s environmental governance.     

When government programs create inequities: A guide to compensation policies

When the government institutes a program thought to be useful for society as a whole, such as building a highway or controlling air pollution, those that benefit from such programs are usually quite different from those that bear its costs. Sometimes the government responds by postponing or modifying the program, sometimes by compensating those that are bearing an inequitable share of the costs. By using familiar economic concepts, the analyst can more effectively choose between the two approaches. Applying those concepts to the case of highway construction in California, we conclude that in this instance cash compensation is clearly superior to postponement as the policy of choice.     

THE WELFARE COSTS OF SUPPLY RESTRICTIONS IN THE GENERAL PRACTICE LABOUR MARKET

Abstract: This paper examines policy arguments for further restricting supply to the Australian General Practice profession by immigration and medical school policies. It uses economic analysis to assess the costs and benefits of supply restrictions. The effects of Medicare and GP income-targeting on policy design are analysed. Restrictions are shown to impose net costs on the community as a whole and on government. Even with Medicare subsidies, the inefficiency costs of the current health system are minimised with liberal policies for accepting foreign- trained GPs.     

Pollution control innovations and the Clean Air Act of 1990

One advantage often cited for market‐based environmental policies is that they are more likely to promote technological innovation than are command and control regulations. This paper uses patent data to study innovation in flue gas desulfurization units (“scrubbers”) across these policy regimes. Plant level data indicate that the effect of these patents on pollution control changed after passage of the 1990 Clean Air Act, which instituted a market for sulfur dioxide (SO₂) permits. Previous regulations requiring plants constructed before 1990 to install scrubbers created incentives for innovation that lowered the costs of operating scrubbers, but did little to improve the environmental effectiveness of the technology. In comparison, innovations occurring since 1990 do serve to improve the removal efficiency of scrubbers. © 2003 by the Association for Public Policy Analysis and Management.     

Policy directions concerning racial discrimination in U.S. housing markets

Abstract

This paper presents a catalog of 34 different proposed research and direct action policies aimed at futhering the two basic goals of public antidiscrimination policies: (1) ending unequal treatment of households in housing transactions because of their race or ethnicity, and (2) counteracting existing racial residential segregation by promoting stable racial integration. These 34 proposals have been derived from the many papers in this volume, plus a few suggestions by the author.

Each proposal is evaluated against five specific criteria of desirability: potential effectiveness, government costs, private‐sector costs, ease of implementation, and political feasibility. A final overall evaluation of each is made, and all policies are divided into three priority categories: high, moderate, and low. Many recommended policies are synergistic. This whole effort should have very high overall priority in American social policy.     

Jobs and environmental quality: some implications for instrument choice

Both politicians and regulatory agencies are frequently forced to make tradeoffs among competing objectives. When these tradeoffs are highly sensitive, as in the case of jobs and environmental quality, they are rarely made explicitly. This paper takes on the task of uncovering the nature tradeoffs among jobs, economic growth and environmental quality. A case study of Wisconsin's innovative attempt for dealing with its air pollution problems provides important insights into why particular policy instruments are selected in balancing economic and environmental objectives. In line with observations of previous authors, the analysis reveals that there is a marked tendency for the political process to resist market mechanisms for rationing scarce environmental resources. In addition to providing a rationale and evaluation of the specific policy being developed by Wisconsin, the paper develops two testable hypotheses regarding the general selection of instruments for making tradeoffs among jobs and environmental quality.     

An evaluation of the quality of impact assessment in the European Union with lessons for the US and the EU

Governments throughout the world are requiring greater use of economic analysis as a way of informing policy decisions. This paper provides a comprehensive analysis of the use of impact assessment in the European Union, using US assessments as a benchmark. We find that recent EU impact assessments include more economic information than they did in the past, although important items are still missing. We also provide evidence that the quality of EU impact assessment increases with the expected cost of a proposal. Furthermore, we find that the quality of EU assessments that report high total costs is similar to that of US assessments.     

Debt,democratization, and development in Latin America: How policy can affect global warming

The environmental Kuznets curve (EKC) hypothesis conjectures a nonlinear relationship between pollution and economic growth, such that pollution per capita initially increases as countries economically develop, but then reaches a maximum point before ultimately declining. Much of the EKC literature has focused on testing this basic hypothesis and, in studies that find evidence of an EKC, estimating the “turning point” level of development at which the per capita pollution‐growth relationship changes sign. This approach has not emphasized the policy relevance of specification issues or the potential role of policy variables. This research explores a modified EKC specification which conditions the pollution‐growth relationship on a country's level of debt and degree of democratization. These variables turn out to be significant, implying that different political and economic contexts can shift EKCs and their turning points. These findings suggest that policies to relieve debt burdens and institute political reform, in addition to their usual justifications, also could be used as a strategy to reduce carbon emissions from developing countries. © 2008 by the Association for Public Policy Analysis and Management.     

Indonesia and bilateral trade agreements (BTAs)

Abstract

This paper analyses the perspectives of Indonesian state and non-state actors towards their country's increasing tendency to use bilateral trade agreements (BTAs) as part of its foreign economic policy. Unlike the other original members of the Association of Southeast Asian Nations (ASEAN), the Indonesian government has been rather slow in pursuing a BTA policy with non-ASEAN member countries. Nevertheless, due to the proliferation of BTAs in other ASEAN countries' foreign economic policies, it was inevitable that Indonesia would pursue similar agreements with its non-ASEAN major trading partners. Despite this, it remains questionable whether Indonesia's participation in such trade agreements will produce such positive results for Indonesian economy. The attitude of the majority of Indonesian domestic constituents to date remains sceptical to this type of agreement. This is not only because BTAs create specific obligations on a range of issues, from trade and investment regimes, this trade strategy also involves deeper and more comprehensive commitments that those agreed at the multilateral level.     

STRATEGIC PLANNING AND ENTERPRISE ZONES

State policy makers are concerned about costs of past policies whose benefits are often difficult to determine. Some have recommended a strategic approach to state economic policy making in order to eliminate ad hoc incentives. Lessons derived from the literature on state enterprise zones are used to assess the 1993 Federal Empowerment Zone and Enterprise Community initiative. States can expand policy alternatives by fostering the growth of a marketplace of economic development ideas at the local level. Strategic plans should focus on development of competing, bottom-up solutions, rather than packages of specific incentives.     

Transactions costs and the optimal instrument and intensity of air pollution control

Conclusions To what extent do the transactions costs of implementing alternative instruments for pollution control affect the choice of the optimal instrument and the efficient intensity of control under that instrument? In a comparison of Least-Cost Regulatory Standards and Revenue-Neutral Pigouvian Taxes, it is the higher transactions costs of implementing the taxes that make Pigouvian Taxes the more costly of the two instruments. However, a more practical comparison of instruments is between Politically Feasible Standards, Marketable Discharge Permits, and Revenue-Raising Pigouvian Taxes. Here, the relationship between the transactions costs of implementation and total pollution costs are in an almost linear inverse relationship. The lower the pollution costs associated with a particular instrument, and therefore the more desirable the instrument, the higher the transactions costs of implementation. Other factors such as political distortion and welfare gains prove to be more important than the transactions costs of implementation.Assuming that variable transactions costs decrease with the optimal level of pollution for regulatory standards but increase with the optimal level for market oriented instruments, an accounting of transactions costs results in less stringent control in the case of regulatory standards and more stringent control in the case of market oriented instruments. However, the percentage effect is very small. Moreover, it is smaller in both cases if marginal pollution damage rises with the level of pollution, as it is usually presumed to do, rather than remain constant as assumed in this paper for purposes of aggregation. A major conclusion of this paper is that Pigouvian Taxes are the superior instrument for pollution control when the raising of public revenues is a desired objective. However, the various conclusions of this paper should be viewed as tentative because the data on which they are based are no longer current. Moreover, the critical estimates of transactions costs are somewhat dubious. It is hoped that new data will be collected for answering the questions raised in this paper. When this is done, a more powerful approach, one that obviates the need for the artificial, one-dollar-damaging, aggregate pollutant, would be an expanded linear programming model in which the transactions costs are treated as separate coefficients of the individual pollution control methods. Separate sets of such coefficients, each corresponding to a different policy instrument such as Least-Cost Regulatory Standards, Revenue-Neutral Pigouvian Taxes, etc., would enable the investigator to directly derive solutions that specify the optimal policy instrument as well as the optimal set of pollution control method activity levels.I am grateful to William Ascher, Murray Weidenbaum, and two anonymous referees for helpful guidance on the paper.     

You Get What You Pay For: Environmental Policy and Public Health

In this article, we examine the cumulative impact of state environmentalprotection policies and environmental quality on the healthof state residents in the United States. Using a series of pathanalytic models, we simultaneously analyze the effect of stateenvironmental policies on environmental pollution and healthoutcomes. Our results indicate that states with stronger environmentalprograms have lower levels of pollution and better public health.These results are robust across multiple measures and alternativemodel specifications. We also find some evidence that statesthat assume authority to implement federal environmental programshave worse health outcomes. Our findings suggest that overalllevels of public health may be affected by state choices withrespect to environmental policies and highlight the importanceof assessing programmatic consequences across policy areas.     

An Evaluation Crucible: Evaluating Policy Advice in Australian Central Agencies

Policy advice is a core function of government that until quite recently remained outside the formal processes of performance evaluation. Evaluation, by its very nature, is designed to question both the effectiveness and relevance of government activities; applying it to policy advice opens up a traditionally confidential and politically sensitive arena. This paper reports on an evaluation experiment in Australian government — policy management reviews (PMRs) — that sought to evaluate the quality of central agency policy advice. It traces the development of the PMR model around interdepartmental committee processes, the bureaucratic politics that diluted the focus on policy outcomes, and examines how central agencies steered evaluation away from questions of public accountability towards arrangements for achieving more effective control of the processes underpinning production of advice. By targeting the process rather than outcomes of policy advising, PMRs sought unsuccessfully to adhere to the divide between management and policy and, in doing so, marked out the limits to performance evaluation.     

Testing Islam's Political Advantage: Evidence from Indonesia

Across the Muslim world, Islamic political parties and social organizations have capitalized upon economic grievances to win votes and popular support. But existing research has been unable to disentangle the role of Islamic party ideology from programmatic economic appeals and social services in explaining these parties' popular support. We argue that Islamic party platforms function as informational shortcuts to Muslim voters, and only confer a political advantage when voters are uncertain about parties' economic policies. Using a series of experiments embedded in an original nationwide survey in Indonesia, we find that Islamic parties are systematically more popular than otherwise identical non‐Islamic parties only under cases of economic policy uncertainty. When respondents know economic policy platforms, Islamic parties never have an advantage over non‐Islamic parties. Our findings demonstrate that Islam's political advantage is real, but critically circumscribed by parties' economic platforms and voters' knowledge of them.     

Framing Trade‐offs: The Politics of Nuclear Power and Wind Energy in the Age of Global Climate Change

This article outlines recent debates over nuclear energy and wind farms in an age of growing concern about climate change. Proponents of these technologies have used “trade‐off” frames to promote these technologies in the face of current and potential opposition to them. This article examines the nature and limits of the trade‐off frames being used and their probability of success. We argue that using the language of trade‐offs is generally a suboptimal framing strategy: trade‐off frames remind the public of the costs associated with particular policies, and therefore play into the hands of policy opponents. However, policy advocates may turn to them when the costs of a technology are well known and are perceived as high. In such cases, trade‐off frames may help to justify controversial policy solutions. Like any frames, the trade‐off frames used in the debate over climate change solutions both illuminate and obscure the deeper issues involved in energy policy reform.     

Explaining the distribution of State funds for national road investments between counties in Norway: Engineering standards or vote trading?

Road investment planning in Norway is officially based on cost-benefit analyses, but the results of such analyses have been shown to have little impact on policy. This paper analyses the distribution of state investment funds for national roads between counties in Norway, trying to find a rational choice explanation of the departure of road investment policy from cost-benefit considerations. Three models are proposed to explain the distribution of investment funds between counties: (1) the highway sufficiency rating model, (2) the net economic benefit model and (3) the vote trading model. Analyses for 1990–93 and 1994–97 investment planning terms support the highway sufficiency rating model and the vote trading model. The net economic benefit model is not supported. The highway sufficiency rating model and the vote trading model are highly correlated, making their relative explanatory contributions impossible to identify.     

Do social policy reforms have different impacts on employment and welfare use as economic conditions change?

This paper uses March Current Population Survey data from 1985 to 2004 to explore whether social policy reforms implemented throughout the 1990s have different impacts on employment and welfare use depending on economic conditions, a topic with important policy implications but which has received little attention from researchers. I find evidence that many reforms operate differently as labor market conditions fluctuate. Although social policies increase employment during economic slowdowns, the largest effects are generated in favorable labor market conditions. The impact of time limits, mandatory job search, and cash diversion programs are particularly sensitive to the macroeconomy, while the earned income tax credit is associated with similar employment effects in most environments. The results vary substantially across policy “carrots” and “sticks,” levels of work intensity, and subsamples of single mothers, but a tentative conclusion is that a strong economy reinforces the positive incentives created by social policy reforms. © 2008 by the Association for Public Policy Analysis and Management.