News Flash: Enforcement Works
My area of research (and occasional blogging) is the writing of regulations. But after regulations get written, they have to be enforced. This means agencies like EPA and OSHA sending out inspectors and looking for violations of regulations and punishing violators. Regblog describes a recent paper that finds (surprise, surprise) that more enforcement means better compliance.
Economists Wayne Gray and Jay Shimshack investigate the impact of enforcement in their recent paper, “The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence.”
They examine the available research to assess whether enforcement actions produce deterrence, leading to improvements in a company’s behavior. They specifically considered whether companies would choose to comply when the money saved by polluting is lower than the expected cost of enforcement, that is, the perceived risk of being caught and punished multiplied by the magnitude of the punishment.
Gray and Shimshack found that traditional enforcement does significantly increase compliance. They stated that, “this suggests that significant increases in environmental quality might be achieved through small incremental investments in environmental monitoring and enforcement.”
In other words, the policing of corporate criminals is just like the policing of other criminals. More boots on the ground means more compliance with the law. Of course boots (and the people that wear them) cost money. Cutting the budgets of EPA and OSHA (and SEC and FDA) means more breaking of the law. If you cast yourself as in favor of “law and order” then you should be in favor of higher enforcement budgets for regulatory agencies.Click here for reuse options!
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