The Cost and Benefits of Government Regulation

Environmental regulation generally takes two forms: (1) technology-based regulation, and (2) risk-assessment-based regulation. In technology-based regulation, uniform standards applicable to everyone are set based on available control technology. This is a very rigid form of regulation and does not require a cost/benefit test. A particularly troublesome situation arises when individual environmental regulations, some technology based, conflict or work against each other. Risk-assessment-based regulation attempts to reach judgments as to the relative risks associated with human and environmental exposure to potentially dangerous substances versus the benefits of the use of such substances. Decisions cannot always be deferred until enough research has been done; therefore, the scientific bases for judgments are often very uncertain. Determining the cost and benefits of environmental regulation is both difficult and controversial. Although efforts to compute costs and benefits may be entirely sincere, the figures are necessarily very soft. Cost to some small communities exacts a much higher economic and social price because the costs must be shared by fewer taxpayers, sometimes placing severe burdens on low-income residents. Knowing the actual state of the environment before imposing regulatory measures and developing innovative approaches can lighten the burden of regulation.