Eight things about enforcement that seem obvious but may not be

Date15 August 2002
Publication Date15 August 2002
Pages519-537
DOIhttps://doi.org/10.1016/S0193-5895(02)20025-1
AuthorAnthony G. Heyes
EIGHT THINGS ABOUT
ENFORCEMENT THAT SEEM
OBVIOUS BUT MAY NOT BE
Anthony G. Heyes
ABSTRACT
Enforcement of any rule or regulation is where 'the rubber hits the road'.
Many economists and policy analysts have been guilty of proposing and
promoting legal and regulatory instruments having given scant or no
regard to the problems that might surround their implementation. Having
said this, a significant and rapidly growing economics literature (both
theoretical and empirical) has sought to think through some of the practical
issues of implementation. Many of its conclusions for policy are not always
obvious, and sometimes downright surprising.
1. 8 CONVENTIONAL WISDOMS 1
1.1. CW 1: We Have a Good Idea What Fraction of Firms Comply
With the Major Environmental Laws
It
is obvious that enforcement issues matter in
designing and appraising
any
regulatory regime. Cost-benefit evaluation of a particular piece of regulation
which implicitly (or explicitly) assumes full compliance is likely to be
misleading if 'slippage' occurs during implementation - particularly if that
An Introduction to the Law and Economics of Environmental Policy: Issues in Institutional
Design, Volume 20, pages 519-537.
Copyright © 2002 by Elsevier Science Ltd.
All rights of reproduction in any form reserved.
ISBN: 0-7623-0888-5
519
520 ANTHONY G. HEYES
slippage is substantial. It is also right and proper that enforcement institutions
and practices themselves come under cost-benefit scrutiny.
Of course, true compliance rates with regulatory requirements are often, by
their nature, difficult to know with certainty. Published government statistics
need to be interpreted with care. 'Compliant' is almost always the default
categorization such that a polluting source being deemed compliant (for the
purposes of recording) means only that the agency has failed to demonstrate
non-compliance. This can be a very different thing - a 1979 report by the
Government Accounting Office estimated that only 3% of sources designated
fully-compliant with air quality regulations were actually compliant. 2
The default designation being 'compliant' means that - apparently paradox-
ically - improvements in the accuracy of the enforcement agency's inspection
technology can, other things being equal, be expected to lead to a decrease in
population compliance. Econometricians have, in recent years, made efforts to
deal with the issues of non-detection in evaluating compliance data. Feinstein
(1989), in a frequently-cited example, uses data from over 1000 NRC inspec-
tions to (jointly) estimate the occurrence of violations, inspections and
abnormality at nuclear power plants. Feinstein pays particular attention to the
econometric problems arising from non-detection and is able to construct
variations in 'propensity to detect' at the individual-inspector level.
These are approaches that need to be developed further and used more widely
-
official data could be adjusted to take account of detection probabilities
(adjusted figures could be reported alongside raw figures, with a brief outline
of the adjustment methodology used).
A well-known study by the White House Council on Environmental Quality
- and reported in Russell (1990) - estimated the following compliance with air
pollution limits by industrial sources: percentage of sources in violation 65;
percentage of time sources that were in violation - 11; excess emissions as
percentage of standards - 10. In the U.K. published compliance rates with many
key water quality standards are significantly below 100%, and true compliance
rates can be expected to be even lower.
1.2. CW 2: More Firms Would Comply With a Rule if the
Penalty for Non-Compliance was Higher
Perhaps the most strongly held - and frequently invoked - conventional wisdom
in the field of enforcement in general, and environmental enforcement in
particular, is that the problem of under-compliance can always and everywhere
be reduced simply by raising penalties. When enforcement agencies, academics
and other policy commentators oppose increases in penalty levels - or when

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