Few will dispute the need for some kind of regulation in a complex society such as ours. However, as the level of regulation in the United States has grown exponentially measured either in number of laws or in pages of the Federal Register (62,928 pages in 1992)- we may be approaching the critical level where in fact the economy is being strangled, where enterprise is restrained, where entrepreneurship is stifled. Indeed, the level of regulatory costs is now in excess of $600 billion per year.
Environmental regulation accounts for a significant portion of today's regulatory cost burdens. Prof. Murray Weidenbaum of the Center for the Study of American Business estimates that one-quarter of the regulatory costs are connected with the environment, and that this is the fastest-growing segment.
As the Clinton Administration and Congress consider clean water, wetlands and other environmental legislation in the next few months, we need to ask the following questions:
The answers to these questions are not easy to come by and require a lot of scientific data and understanding.
Initially, environmental regulation did prove to be cost-effective. Removing the first large increment of pollutants from water and air probably produced more benefits than it cost. In the last 20 years there have indeed been tremendous improvements in the quality of the air, and of streams and lakes.
But removing the last few per cent of pollution is enormously expensive and often not even within the reach of technology.
Science tells us that there is little if any additional return from the complete elimination of "hazards" such as pesticides, asbestos, dioxin, radon and various air pollutants. Most gains come from eliminating the initial 90%--which is generally simple and cheap--rather than from eliminating the last 1%--which is frightfully difficult, in many cases virtually impossible, and in almost all instances extremely costly The goal of zero risk is not only unrealistic, but unattainable and infinitely costly.
The enormous expense of further curbing effluents from power plants factories and cars and now, in Los Angeles, from dry-cleaning shops, the corner garage, and the bakery down the street as well--must be passed along to the consumer through higher prices. Otherwise these establishments have to fold.
As sales fall due to higher prices and some firms cannot maintain their viability, workers lose their jobs. Small businesses, in particular, cannot afford the specialists to fill out the innumerable forms needed for emission permits, or to take the precise measurements required, or to employ the myriad of environmental consultants, lawyers, and just plain paper pushers.
Furthermore, the way in which environmental controls are en- forced contributes significantly to their burden.
Courts and juries are holding companies with deep pockets guilty of "criminal" offenses for environmental accidents, like the Exxon Valdez. The assigning of liability post-facto, often hitting not the actual polluter but those who can afford to pay, is dampening new investment.
Although this disincentive is impossible to quantify, the fear of exposure to enormous costs must be having a crimping effect on economic growth.
Investors are increasingly wary of putting their money in the United States because any serious environmental mishap with which they could be remotely connected might subject them to huge liabilities.
One cannot stress enough the importance of sound science in setting environmental regulations. There are many examples too many of misguided regulations based on pseudo-science or worse, and applied without regard for geographic differences or other commonsense factors.
The 1990 Clean Air Act gives us many good examples.
One title of the law deals with air toxics, the emission of substances that could conceivably cause cancer. The problem is that the cancer risk is calculated for a susceptible person who is maximally exposed to the atmosphere for 70 years, and that the risks are computed based on dubious scientific data.
Furthermore, the analysis neglects the obvious: The fact that the person will be indoors for much of his life exposed to an indoor air quality that is likely to be much more hazardous. Even so, cancer risk, normally about 25%, would be reduced to only 24.99999%, but at a cost of many billions of dollars that could have been used to save many more lives by reducing more down-to-Earth risks.
Yet another title deals with the acid rain problem, the acidification of rain by sulfur dioxide from coal-burning power plants. It calls for emissions reduction nationally of 10 million tons per year a nice round number for which there is no scientific justification whatsoever, except that it would cut the remaining emissions in half.
Over the last 20 years, the emissions have already been reduced by 25% to 30% without much noticeable impact on acidity.
Furthermore, the science has changed completely since the early '80s when there appeared to be some cause for concern about the health of lakes and forests. By the end of the decade these fears had disappeared.
A major scientific study, conducted under government auspices, had demonstrated that most small lakes affected are naturally acidic and that forests are not harmed. This new scientific evidence was never disputed; it was simply ignored.
Those who wanted to pass the extremely expensive control legislation that would add some $5 to $10 billion to the cost of electricity simply declared the scientific studies to be "not policy-relevant."
One final example: the precipitous phase-out of production of chlorofluorocarbons (CFCs). The policy decisions here were driven by hype and fear, by false stories of blind sheep and rabbits in Patagonia, and by exaggerating the fear of skin cancer.
Press releases about ozone depletion always refer to it as "worse than expected." The question was never raised whether the theory underlying the expectations was wrong, whether the observations were wrong, or whether both were wrong; yet these are the only logical choices.
What can be done about excessive regulation, not supported by scientific evidence, yet imposing tremendous costs on the economy, destroying jobs, and discouraging entrepreneurs and small business enterprises?
Somehow to use President Clinton's words the public must be made to "feel the pain." In other words, there is hope, provided the public can be educated about the cause-and-effect relationship between overregulation and the loss of jobs and lower standards of living.
One way to do this is by having people pay directly for what is judged to promote environmental quality. Within the next few years, motorists will face not only higher gasoline taxes but also greatly increased costs in monitoring car emissions and in recharging or replacing air-conditioning systems.
Perhaps these and other similar instances of direct, out-of-pocket costs will lead to a kind of consumer revolution, which in turn can lead to an overhaul and rationalization of our whole system of environmental regulation.
The purpose of environmental regulation is to improve human health and protect ecological values. But once past the initial level, further clean-up gains little in the way of health benefits.
Households could take the estimated $l,500 per year that they pay for environmental regulations and spend it better on food and shelter and proper medical care. It is well-recognized that "wealthier makes healthier." And cleaner, too.