Environmental Law and Policy

This chapter provides an economic perspective of environmental law and policy with regard to both normative and positive dimensions. It begins with an examination of the central problem in environmental regulation: the tendency of pollution generators in an unconstrained market economy to externalize some of the costs of their production, leading to an inefficiently large amount of pollution. We examine the ends of environmental policy, that is, the setting of goals and targets, beginning with normative issues, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. We examine this analytical method in detail, including its theoretical foundations and empirical methods of estimation of compliance costs and environmental benefits. We include a review of critiques of benefit-cost analysis, briefly examine alternative approaches to analyzing the goals of environmental policies, and survey the efforts of the Federal governmental to employ these analytical methods. The chapter also examines in detail the means of environmental policy, that is, the choice of specific policy instruments, beginning with an examination of potential criteria for assessing alternative instruments, with particular focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional, command-and-control mechanisms, economic incentive or market-based instruments, and liability rules. In the economic-incentive category, we consider pollution charges, tradeable permit systems, market friction reductions, and government subsidy reductions. Three cross-cutting issues receive attention: implications of uncertainty for instrument choice; effects of instrument choice on technological change; and distributional considerations. We identify a set of normative lessons in regard to design, implementation, and the identification of new applications, and we examine positive issues, including three phenomena: the historical dominance of command-and-control; the prevalence in new proposals of tradeable permits allocated without charge; and the relatively recent increase in attention given to market-based instruments. Finally, the chapter turns to the question of how environmental responsibility is and should be allocated among the various levels of government. We provide a positive review of the responsibilities of Federal, state, and local levels of government in the environmental realm, plus a normative assessment of this allocation of regulatory responsibility. We focus on three arguments that have been made for Federal environmental regulation: competition among political jurisdictions and the race to the bottom; transboundary environmental problems; and public choice and systematic bias.

Environmental Law and Public Policy

This chapter provides an economic perspective of environmental law and policy with regard to both normative and positive dimensions. It begins with an examination of the central problem in environmental regulation: the tendency of pollution generators in an unconstrained market economy to externalize some of the costs of their production, leading to an inefficiently large amount of pollution. We examine the ends of environmental policy, that is, the setting of goals and targets, beginning with normative issues, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. We examine this analytical method in detail, including its theoretical foundations and empirical methods of estimation of compliance costs and environmental benefits. We include a review of critiques of benefit-cost analysis, briefly examine alternative approaches to analyzing the goals of environmental policies, and survey the efforts of the Federal governmental to employ these analytical methods. The chapter also examines in detail the means of environmental policy, that is, the choice of specific policy instruments, beginning with an examination of potential criteria for assessing alternative instruments, with particular focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional, commandand- control mechanisms, economic incentive or market-based instruments, and liability rules. In the economic-incentive category, we consider pollution charges, tradeable permit systems, market friction reductions, and government subsidy reductions. Three cross-cutting issues receive attention: implications of uncertainty for instrument choice; effects of instrument choice on technological change; and distributional considerations. We identify a set of normative lessons in regard to design, implementation, and the identification of new applications, and we examine positive issues, including three phenomena: the historical dominance of command-and-control; the prevalence in new proposals of tradeable permits allocated without charge; and the relatively recent increase in attention given to market-based instruments. Finally, the chapter turns to the question of how environmental responsibility is and should be allocated among the various levels of government. We provide a positive review of the responsibilities of Federal, state, and local levels of government in the environmental realm, plus a normative assessment of this allocation of regulatory responsibility. We focus on three arguments that have been made for Federal environmental regulation: competition among political jurisdictions and the race to the bottom; transboundary environmental problems; and public choice and systematic bias.environmental economics, environmental law, efficiency, cost-effectiveness, benefitcost analysis, environmental federalism

Environmental Law and Policy

This chapter for the Handbook of Law and Economics provides an economic perspective of environmental law and policy. We examine the ends of environmental policy, that is, the setting of goals and targets, beginning with normative issues, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. We examine this analytical method in detail, including its theoretical foundations and empirical methods of estimation of compliance costs and environmental benefits. We review critiques of benefit-cost analysis, and examine alternative approaches to analyzing the goals of environmental policies. We examine the means of environmental policy, that is, the choice of specific policy instruments, beginning with an examination of potential criteria for assessing alternative instruments, with particular focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional, command-and-control mechanisms, market-based instruments, and liability rules. Three cross-cutting issues receive attention: uncertainty; technological change; and distributional considerations. We identify normative lessons in regard to design, implementation, and the identification of new applications, and we examine positive issues: the historical dominance of command-and-control; the prevalence in new proposals of tradeable permits allocated without charge; and the relatively recent increase in attention given to market-based instruments. We also examine the question of how environmental responsibility is and should be allocated among the various levels of government. We provide a positive review of the responsibilities of Federal, state, and local levels of government in the environmental realm, plus a normative assessment of this allocation of regulatory responsibility. We focus on three arguments that have been made for Federal environmental regulation: competition among political jurisdictions and the race to the bottom; transboundary environmental problems; and public choice and systematic bias.

Financial instruments fair value accounting for (not against) the banking industry

The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature. December 2002. Revised: June 2003. Later version: http://publikationen.ub.uni-frankfurt.de/volltexte/2005/1026/ with the title: "Accounting for financial instruments in the banking industry : conclusions from a simulation model

PACIOLI 17; Innovation in the management and use of Micro Economic Databases in Agriculture

The PACIOLI network explores the need for and feasibility of innovation in farm accounting and its consequences for data gathering for policy analysis in Farm Accountancy Data Networks (FADNs). PACIOLI 17 took place in Ettenhausen, Switzerland, in June 2009. The theme of the workshop was 'Innovation in the management and use of Micro Economic Databases in Agriculture'

Accounting for financial instruments in the banking industry: conclusions from a simulation model

The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature

Cooperative Organizational Strategies: A Neo-Institutional Digest

This paper describes the neo-institutional approaches of transaction cost economics, agency theory, and property rights analysis and summarizes efforts by economists to apply these concepts to cooperatives. Several problems intrinsic to the cooperative organizational form and its property rights structure are reviewed. These problems have been hypothesized to affect the comparative economic efficiency of cooperative firms and have led to the development of life cycle models seeking to explain the formation, growth, and eventual decline of cooperatives as markets evolve. In this context, statistical analyses of the comparative efficiency of cooperatives and ex post studies of cooperative conversions are surveyed.Agribusiness,