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Costs of Environmental Regulation Worth the Reward?

By: Joe Winning

Blog Category: Economics of Environmental Regulation

There’s a feeling among many Americans that the benefits of environmental regulation in this country are not worth the cost. These opinions reflect the prevailing view that broad environmental regulations impose substantial costs, such as (1) excessively high prices, (2) greater unemployment, (3) more poverty, and (4) increased difficulty for American companies & workers attempting to compete in increasingly international market. While this blogger tends to agree with this perspective and would argue incentives are a better approach, Dr. Frank S. Arnold offers a compelling alternative argument that the costs of regulation are indeed worth the reward.

Although written in 1999, Dr. Arnold’s research remains compelling, if for no other reason than providing calculable benchmarks to evaluate the value of this countries’ spending in the area of environmental regulation. In support of his argument, Arnold draws three major conclusions. First, national spending for environmental regulation is considerably less than the countries’ spending in areas such as health care and national defense. Next, regarding the nation’s “bang for its buck,” Dr. Arnold draws comparisons to other countries and their cost of regulation, concluding that the United States has attained a similar outcome for the amount spent. Finally, while critics insist the countries’ environmental regulation spending is destroying the nation’s job market, Dr. Arnold contends this is not the case. Arnold demonstrates the flaw in this argument by pointing to the lack of plant closures and job loss directly related to employer costs of environmental regulation. He also highlights the fact that there has not been a surge of companies fleeing the United States to go to countries with lower costs tied to environmental regulation. Although this article is somewhat dated and this blogger contends the best approach is economic incentives compared to regulations, the benchmarks outlined by Dr. Arnold remain compelling in evaluating the costs of environmental regulation in this country.

The opinions expressed herein are strictly those of the author and do not necessarily reflect the opinions of the Widener Journal of Law, Economics & Race.  

Source:

Frank S. Arnold, Environmental RegulationIs It Bad for the Economy?, Environmental Law Institute (July 9, 1999), available at http://ase.tufts.edu/gdae/es135/Environmental%20Protection%20and%20Economy.pdf.

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