Externalities and the Matching Principle: The Case for Reallocating Environmental Regulatory Authority

Abstract

Our current environmental regulatory system was an understandable response to a perceived need for immediate controls to prevent a pollution crisis. But the system has grown to the point where it amounts to nothing less than a massive effort at Soviet-style central planning of the economy to achieve environmental goals. It strangles investment and innovation. It encourages costly and divisive litigation and delay. It unduly limits private initiative and choice. The centralized command system is simply unacceptable as a long-term environmental protection strategy for a large and diverse nation committed to the market and decentralized ordering.