Roger G. Noll

Is There a Role for Benefit-Cost Analysis in Environmental, Health, and Safety Regulation?

Benefit-cost analysis can play an important role in legislative and regulatory policy debates on protecting and improving health, safety, and the natural environment. Although formal benefit-cost analysis should not be viewed as either necessary or sufficient for designing sensible public policy, it can provide an exceptionally useful framework for consistently organizing disparate information, and in this way, it can greatly improve the process and, hence, the outcome of policy analysis. If properly done, benefit-cost analysis can be of great help to agencies participating in the development of environmental, health, and safety regulations, and it can likewise be useful in evaluating agency decision-making and in shaping statutes.

The Economic Theory of Regulation after a Decade of Deregulation

WHAT HAS COME to be called the economic theory of regulation, or ET, began with an article by George Stigler in 1971.1 The most important element of this theory is its integration of the analysis of political behavior with the larger body of economic analysis. Politicians, like the rest of us, are presumed to be self-interested maximizers. This means that interest groups can influence the outcome of the regulatory process by providing financial or other support to politicians or regulators. Simultaneously with Stigler, Richard Posner provided an important critique, and several years later he gave the theory its grandiose name. The major theoretical development of the ET has been an article by Peltzman in 1976 and one by Gary Becker in 1983.2 By conventional measures the theory has been an academic success. In this paper I evaluate that success in light of the changes in regulatory institutions that have occurred since the ETs early development.

Economic perspectives on the politics of regulation

Publisher Summary This chapter discusses the three themes of economics research on regulation. The first and oldest deals with market failures and the corrective actions that government can undertake to ameliorate them. The second examines the effects of regulatory policies and asks whether government intervention is efficient or more efficient than doing nothing. The third investigates the political causes of regulatory policy. The motivation arises from the disjointness in the first two areas of research: regulation as practiced commonly has been found to be inefficient and to adopt methods that do not appear to be the best choices for tackling their associated market failures. The chapter presents an interpretative survey of the third category of research. It focuses on research that employs the conceptual model and methods of economics—that is, it assumes rational, goal-directed behavior by all relevant agents—that uses economic theoretic discussions to make predictions about political behavior and, where relevant, that employs the methods of testing theoretical hypotheses that economists commonly employ. Regardless of the motives of political actors, an essential ingredient to a theory of regulatory policy when the Coase Theorem fails is the way political officials control agencies. Whether the aim of regulation is to maximize efficiency or to transfer wealth to a special interest, politicians face a principal agent problem in trying to assure reasonable bureaucratic compliance with the objectives behind a legislative mandate.

Sports, jobs, and taxes : the economic impact of sports teams and stadiums

This book examines the economic impact of new stadiums or a sports franchise on the local economy. It explores such general issues as the appropriate method for measuring economic benefits and costs, the source of the bargaining power of teams in obtaining subsidies from local government, the local politics of attracting and retaining teams, the relationship between sports and local employment, and the importance of stadium design in influencing the economic effects of a facility. The book also contains case studies of major league sports facilities in Baltimore, Chicago, Cincinnati, Cleveland, Indianapolis, San Francisco, and the Twin Cities and of minor league baseball stadiums and spring training facilities. The primary conclusions are the sports teams and stadiums are not a source of local economic growth and employment; the size of the net subsidy exceeds the financial benefit of a new stadium; and cities are probably willing to subsidize sports teams because of the intense popularity of sports among a substantial proportion of voters and businesses and the leverage that teams enjoy from the monopoly position of professional sports leagues.

Voters, bureaucrats and legislators: A rational choice perspective on the growth of bureaucracy

The claim that government is excessively bureaucratic can be interpreted as an assertion about inefficient factor proportions in the production of public goods. The rational choice theory of electoral competition is extended in this paper to include the election of representatives from separate districts, ombudsman activities by legislators, self-interested bureaucrats and production functions for public activities that have bureaucratic and nonbureaucratic arguments. If the demand for public goods grows exogenously through time, the model predicts increasingly inefficient factor proportions yet a growing advantage for incumbent legislators when they seek reelection.

The economics of promotion and relegation in sports leagues - the case of English football.

In most of the world’s professional sports leagues, the worst teams in better leagues are demoted while the best teams in weaker leagues are promoted. This article examines the economics of promotion and relegation, using data from English football (soccer). The crucial findings are as follows: players earn higher wages under promotion and relegation, promotion and relegation has a net positive effect on attendance, and the effect of promotion and relegation on competitive balance is ambiguous. The unbalancing effect arises because the system places some teams in leagues in which they have no realistic chance to afford a winning team, thereby causing teams to spend less on players during their (brief) stay in a higher league than they spent while trying to be promoted from as lesser league. The article concludes with an analysis of how promotion and relegation might be implemented in North America.

Broadcasting and Team Sports

Television rights are the largest component of revenues for major sports in large, rich nations. Among these nations, the market structure for rights varies due to different competition policies toward sports and television. This essay examines how game coverage, revenues, and competitive balance are affected by competition in commercial television and sales of rights. It argues that consumers are better off if television is competitive and leagues do not centralize rights sales. We conclude that centralization of rights sales does not improve competitive balance or benefit financially weak teams. Finally, while digital telecommunications are making television competitive, ending centralization of sales by leagues requires policy intervention.

How to vote, whether to vote: Strategies for voting and abstaining on congressional roll calls

This paper develops and tests a theory of voting and abstaining on Congressional roll calls. The theoretical model assumes that the voting behavior of legislators is oriented toward reelection, and that constituents vote retrospectively. Among the predictions of the theory are that supporters of a program are more likely to abstain than opponents, that conflicted legislators are more likely to vote on the losing side (but will abstain when the vote is very close), and that indifferent legislators will abstain when votes are not close but trade their votes when the outcome is uncertain. The empirical test is based on a series of votes on appropriations for the Clinch River Breeder Reactor from 1975 to 1982. We estimate a nested logit model of, first, the probability of voting for Clinch River, and second, the probability of abstaining from the vote, conditional on preferences regarding the program. All of the empirical results are consistent with the theoretical predictions, and most are statistically significant by conventional standards. The implication is that the abstention decision, as well as yes or no votes, can be purposive, and that the pattern of abstentions is not random among supporters and opponents.

Environmental markets in the year 2000

This article examines the prospects for marketable emissions permits in the coming decade. We identify both the reasons that politicians are reluctant to embrace marketable emissions permits as a solution to environmental problems and also changes in the political landscape that could lead to the increased use of this approach. Over the next decade, we believe there is reason to be cautiously optimistic. Selective experimentation with market-based approaches is likely to continue; however, we are not optimistic about the prospects for widespread application of this tool. Moreover, applications of this tool will necessarily reflect important political constraints, thus rendering the tool substantially less effective than the textbook applications examined by economists. An important intellectual challenge is to work on the design of market-based approaches that address political concerns, enhance efficiency, and promote innovation, so that it will be easier to meet the environmental challenges that lie ahead.

New Tools for Studying Network Industry Reforms in Developing Countries: The Telecommunications and Electricity Regulation Database

Infrastructure industries-including telecommunications, electricity, water, and gas-underwent massive structural changes in the 1990s. During that decade, hundreds of privatization transactions valued at billions of dollars were completed in these sectors in developing and transition economies. While privatization has received the most attention, reforms also included market liberalization, structural changes like unbundling, and the introduction of new laws and regulations. To date, regulations have received far less attention than their potential economic effects warrant, largely due to lack of data. In order to address this problem, the authors set out to compile a comprehensive and consistent dataset through an extensive survey of telecommunications and electricity regulators in developing countries. The authors describe the surveys and the resulting database. The database of telecommunications regulations includes 178 variables on regulatory governance and content in 45 countries. The database of electricity regulations includes 374 variables in 20 countries.