Twenty-Five Years Of Environmental Regulation:
What Americans Have Learned

Alexander Volokh
speech delivered at UrbanEco97, American-Russian Conference, "A Safe Environment for Big Cities on the Threshold of the 21st Century," February 4-6, 1997, San Diego, Calif.

Good afternoon. My name is Alexander Vladimirovich Volokh of the Reason Foundation, and I'm going to be talking to you about American environmental regulation. I was born in Kiev, but my family emigrated from the Soviet Union in 1975, so I have been living in Los Angeles for the last 21 years, actively forgetting my Russian. But in the interests of cross-cultural understanding and "friendship of peoples," I will try and deliver my talk in Russian. I hope that you will understand me and that you will be able to understand your questions if you ask them in Russian, but I also hope you will forgive me if I answer them in English.

I will be discussing the lessons that Americans have learned from 25 years of environmental regulation -- lessons about the appropriate role of government planning and the appropriate role of voluntary action, private property, and market forces. Today is an especially fitting day for discussing these ideas, because today is the 86th birthday of President Ronald Reagan. Reagan's accomplishments are still highly debated and controversial, but the fact remains that he may have done more than any other single person to bring us to the consensus we have today in America on the role -- more precisely, the reduction of the role -- of government.

Environmental regulation has existed since the foundation of the United States, and even existed hundreds of years ago in England. If a landowner dumped sewage into a river so that another landowner downstream could no longer fish in the water, the downstream landowner could take the first landowner to court. If a factory emitted noxious fumes that contaminated the pasture grounds of a neighboring dairy farm, the dairy farm could sue the factory. Parishioners at a church brought a successful lawsuit against a railroad company because of its air and noise pollution.

This system of environmental regulation, which did not come from laws enacted by parliaments, but emerged from the evolving tradition of Anglo-American jurisprudence, was based on private property. Sometimes the court made the polluter pay the victim for the damage to him or his property; sometimes the court decided that the harm to the victim was a serious enough infringement of his property rights to make the polluter decrease his polluting activities or stop them altogether. Often, the courts balanced the competing demands of industry and neighboring landowners, and decided that a particular level of pollution was too low to regulate, or decided that the landowner had no claim because he knew about the pollution when he bought his land. In any case, the remedies for pollution were based on the traditional notions of "nuisance" and "trespass."

Even in the absence of the legal system to settle disputes, the very existence of private property was often an effective conservation device. For example (or rather, for a counterexample), many of you may remember the fable by Ivan Andreyevich Krylov about the pig beneath the oak, who ate its fill of acorns and started to dig up the roots of oak. "But this will harm the tree, you know," from the oak's branches said the crow. "Without its roots, the tree may dry." "Oh, let it!" was the pig's reply. "What do I care? The roots don't matter. I just want acorns -- for they make me fatter." In America, we call this the story of killing the goose that laid the golden eggs. Economists call this problem "The Tragedy of the Commons" -- when a resource is collectively owned, no one has an incentive to invest in the improvement of that resource. Instead, they have an incentive to chop down the tree and take the acorns before they are ripe, because if they don't, someone else will. This is why Americans have dirty public parks. On the other hand, private ownership of the resource encourages responsible stewardship. This is why Americans have clean private lawns. If the pig had been a shrewd businessman who owned the oak and had secure property rights, he would have waited until all the acorns were ripe, and probably would have planted more trees and sold the excess acorns.

But in the late 1960s and early 1970s, the American government turned toward more interventionist measures, and enacted laws and regulations to address environmental problems. This happened not because private property-based solutions had failed, but because where property rights are poorly defined, as they are in large metropolitan air basins, the legal system, with its individual disputes, is not always the best way to improve environmental quality. But the move toward greater regulation was also the result of ideology; many academics and politicians at the time had an innate distrust of private property and market forces, and believed that all problems, including environmental problems, were best solved by government at the federal level.

The American environmental movement started out intensely idealistic, imbued with moral fervor, and convinced that its mission was to save the world. One watershed of the movement was the publication in 1962 of the book Silent Spring, in which the biologist Rachel Carson hyperbolically predicted that man-made chemicals were so harmful and pervasive that one day, Spring would come and no birds would sing. Another important moment was Earth Day on April 22, 1970, which fell, not by accident, on the 100th anniversary of the birth of Lenin. Environmental activists took advantage of the publicity surrounding Earth Day to call for sweeping government-led initiatives to improve air quality, water quality, hazardous waste disposal, and so on. Within the next decade, Congress passed:

• the Clean Air Act;
• the Clean Water Act;
• the Endangered Species Act;
• the Resource Conservation and Recovery Act, which regulates the transportation and disposal of hazardous wastes; and
• the Comprehensive Environmental Response, Compensation, and Liability Act, also called "Superfund," which regulates the cleanup of hazardous waste sites.

The idea behind American environmental regulation was very simple; as anyone knows who has read Krylov, "Don't spit inside a well; just think, you might want to drink." But the regulations themselves were anything but simple. Over the last 25 years, we have discovered many fundamental problems with our regulatory structure. I will give you just a few examples.

• Air quality, water quality, and hazardous waste regulations did not merely regulate pollution. The regulations controlled the intimate details of the operation of every company, down to what machinery every company had to use. Instead of regulating pollution, the output of the industrial process, the law regulated technology, the input.

  The trouble was that governments can be good at establishing fair rules of conduct between people, but they are usually bad at making management decisions for individual companies. They do not have as much information as each company manager has, and because of their bureaucratic nature, they work much more slowly than technological innovation. A company that wanted to adopt a new technology had to ask the government for a permit, but the time and expense involved often meant that it made more sense for the company to stick with the older, dirtier methods. The emphasis on technology and inputs slowed environmental improvement by preventing firms from investing in whatever technology was most efficient for their needs.

• Laws that tried to protect sensitive ecological areas or endangered wildlife also suffered from serious problems. The Endangered Species Act tried to protect species in the most direct way. It told landowners, "If you find an endangered species on your property, you cannot develop your land near where that animal lives." It seemed like the most direct way to prevent the extinction of endangered species, but many now believe that it may have had the opposite effect. The law made the interests of endangered species opposite to those of landowners. Landowners with an endangered species could find the value of their land drop to zero, but they were almost never compensated for this loss. Many farmers or owners of private forests are afraid of finding an endangered species on their property, and actively manage their property to prevent endangered species from wanting to live there. The law has also encouraged a mentality among some landowners that is picturesquely called, "Shoot, shovel, and shut up."

I could tell similar stories about many other environmental programs. Laws that tried to improve the environment regardless of cost became highly burdensome to businesses, landowners, and ordinary citizens; as the environment became cleaner and cleaner, additional improvements became more and more expensive, even as they became less and less ecologically valuable. Laws that tried to control every company decision in detail necessarily became highly complex, highly technical, and confusing. The complete text of some regulatory programs often takes up thousands of pages. One judge jokingly remarked that the people who wrote hazardous waste law "ought to be shot." Two-thirds of corporate environmental lawyers said in a 1993 survey that their companies had violated some environmental law during the previous year because of uncertainty and complexity. Seventy percent believed that full compliance with all federal and state environmental laws was impossible.

More agencies and committees and bureaucratic layers were created to solve more complicated problems, but the problem was the complexity itself. Shuffling the responsibilities around proved to be counterproductive when the agencies themselves had ineffective tools. As Krylov commented on the quartet that tried to play better music by switching seats: "And you, no matter what position, will never make a fine musician."

It did not help that most environmental laws were passed on the federal level, so that the same standard was mandated for different regions, regardless of different regions' values and tolerance for environmental risk. Nor did it help that environmental enforcers often adopted a deliberately confrontational attitude with respect to industry. The success of enforcement programs was measured by how many inspections were done, how much money was collected in penalties, how many violators were convicted of environmental crimes in court. Again, the focus was on measuring inputs -- that is, enforcement activity -- not outputs -- that is, environmental quality, which is the ultimate goal of any environmental program. Instead of being encouraged to seek out violations that caused the most environmental harm, or violations committed intentionally or recklessly, environmental agencies were simply encouraged to bring more cases. In practice, this meant choosing the easiest cases instead of the worst ones. In the beginning, when environmental problems were large, this approach may have worked, but as problem after problem was solved or greatly reduced, the inadequacies of this approach became painfully clear.

All of this speaks to a common problem. Once upon a time, American environmental problems were like a haystack, and could be fixed even with inefficient tools. Today, they are like a needle in a haystack, and ordinary pitchforks are no longer enough. Moreover, inefficient laws worked in the United States because in the 1970s, the United States already had a high standard of living and a great deal of resources. A little waste could go unnoticed and, indeed, did go unnoticed for many years. But not everyone can afford to repeat our mistakes. Russian federal, regional, and municipal authorities are not in a position to waste massive public and private resources, even in the pursuit of a worthy goal like environmental quality. The Russian economy is still going through a precarious transition period. Governments do not have a lot of money. Underpayment of taxes is a serious problem. Inflexible policies that mandate environmental improvements at too high a cost can have serious unintended side effects and decrease people's overall well- being. If Russians are serious about environmental improvements, they must start out on the right path. This means that they must take note of the lessons that we have learned since 1970:

• First, if you are interested in controlling pollution, regulate pollution. For instance, set an objective standard of pollution, and allow companies to meet that standard in any way they like. Be flexible. Allow companies to pollute more, as long as they can get get some other companies to pollute less. American environmental agencies do this by setting up systems of tradeable pollution permits.



• Second, if you are interested in measuring environmental compliance, do not measure the activity of your environmental enforcement agencies. Instead, measure improvements in environmental quality.



• Third, make your regulations easy to understand, easy to comply with, and based on actual environmental measurements, like environmental risk.



• Fourth, do not mandate the same standard for everyone. If problems are localized, let local governments set their own standards. If problems are regional, let regional governments solve them. It makes sense that residents of Moscow will have different tolerances for risk than residents of Chukotka.



• Fifth, Americans are fond of saying that "there ain't no such thing as a free lunch." Or, as my father says, "If life is priceless, how come it's so expensive?" Everything comes at a cost. So do environmental improvements. Resources spent on environmental quality cannot be spent on health care, crime prevention, or defense, and since resources are not unlimited, they must be spent wisely.



• Sixth, remember that any effective solution to environmental problems must rely on private property and market forces. People will take care of what they own, and they will act without the need for compulsion if they can be convinced that environmental improvements can also be in their self-interest.

This is what Americans -- at least, some of them -- have learned from 25 years of environmental regulation. I hope that you will be able to implement rational environmental regulations without having to repeat our costly mistakes. Thank you very much.

Alexander Volokh has written extensively on American environmental regulation. His policy studies include "Environmental Enforcement: In Seach of Both Effectiveness and Fairness," "Punitive Damages and Environmental Law: Rethinking the Issues," and a policy series entitled "Recycling and Deregulation: Opportunities for Market Development." His studies are available from the Reason Foundation, 310-391-2245.