The Law and Economics of Federalism
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The Law and Economics of Federalism

Edited by Jonathan Klick

This unique volume takes a primarily empirical perspective on the law and economics of federalism. Using cross jurisdiction variation, the specially commissioned chapters examine the effects of various state experiments in areas such as crime, welfare, consumer protection, and a host of other areas. Although legal scholars have talked about states as laboratories for decades, rarely has the law and economics literature treated the topic of federalism empirically in such a systematic and useful way.
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Chapter 4: Do profits promote pollution? The myth of the environmental race to the bottom

Robert K. Fleck and F. Andrew Hanssen

Abstract

Environmentalists, politicians, and scholars often express concern about “races to the bottom” in environmental standards. Although worries about environmental policy being too lax may be well founded, the cause is generally not a race to the bottom. Rather, the potential for overly lax environmental standards arises from governments failing to act in the interests of their people – that is, from unrepresentative government. Even if competing for firms, governments that are broadly representative of citizens’ interests will not engage in environmental races to the bottom. By contrast, governments that pay little attention to citizens’ interests often implement overly lax environmental standards, even if they are not competing for firms. Focusing on root causes can help promote solutions that actually improve the environment. The need is certainly great – the world has a multitude of serious environmental problems, and each year many people die as a result of lax environmental policy. Blaming a race to the bottom pushes attention away from where it should be: on governments that fail to represent the interests of their citizens.

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