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

Abstract

The extreme centralization of environmental regulation is the result of interest group politics and dramatic political developments rather than a sober analysis of the major trade-offs involved in moving to federal domination of environmental protection. During the late 1960s and early 1970s, many environmental concerns that had previously been thought of as purely local issues, such as solid waste disposal, became federal issues. Although there is little doubt that national politicians were ahead of the curve in terms of responding to environmental concerns, one must not then assume that state and local politicians would have continued to be unresponsive to environmental issues arising in their own backyards. Nevertheless, there appears to be a one way ratchet in the federal system-once a federal issue, always a federal issue. Moreover, among many environmentalists, there remains a deep distrust of state and local control of environmental quality. An analysis of the incentives of state and local politicians suggests that this distrust may not be justified. This study considers whether environmental policy can be improved by reallocating authority for environmental regulation within our federal system.