Rules of the Game

I have a favorite analogy I like to use when it comes to talking about government regulation in business and environmental matters.  Throwing a football around with a friend is like the free market.  I have the ball and I want to throw it--my friend wants to catch it--so we make an exchange.  Throw and catch is fun for only so long.  We want to play a game so we gather some people to play against us.  With a pickup game there is lots of variation with the rules to which you play.  Tackle, two hand touch, QB sneak, one blitz every four downs, pads and helmets, clock or score finish etc.  Even though you may have rules in place it doesn’t mean they will be enforced or the game played fairly.  This type of game requires voluntary action between the competitors and this is often ineffective because it requires honesty and good faith.  But many competitors take an unscrupulous “by any means necessary” approach to winning the game as a corporation would to their bottom line.  Just as someone lying about being touched in a two-hand touch football game, a chemical plant could easily lie about the previously agreed upon amount of chemicals they were polluting in the river because no one was there to hold them accountable but themselves.  Enough of this conservative ideology analogy. 

On the light side of the force is the liberal pro-regulation point of view.  There is no better representation of this than the NFL, or National Football league.   When the league was formed 50 years ago the players wore leather hats impersonating helmets and the field goal post was at the front of the end zone.  Every year since Super Bowl I the league has added new rules and regulations like unnecessary roughness penalties, drug testing, and the salary cap to create parity and fairness.  Anytime they added a new rule, say pass interference, it was always met with objection by a portion of players and fans who thought that it was unfair to the defense who couldn’t be as physical.  The great thing about regulation is that it forces change and innovation.  In the case of pass interference, the change and innovation came from the cornerback, the player who guards the receiver, becoming a smaller, more agile player that was able to keep up with the quickness of the receiver while not having to use brute force, which required a heavier and stronger cornerback, to knock the receiver off his routes.  Innovation thrives on constraints and environmental regulation certainly creates constraints. 

California has long been a leader in progressive automotive pollution control standards because they have been able to leverage car manufacturers to create new and environmentally friendly technology like the catalytic converter by restricting company’s access to their giant car market unless they meet the standards set by the state.  Environmental regulation needs to be lead by the federal government because pollution is such a transboundary problem.  Although in most cases I believe that the states also have an important role in regulating their own point-source pollution, many of the individual states interests are entrenched with the industries creating the pollution such as natural gas drilling which I believe is the most frightening pollution in America.  An excellent documentary premiered on HBO this summer on the paradox of natural gas.  Gasland Trailer 

To my dismay as a stout pro-(strong)regulation, it seems the direction America’s environment policy is headed is the market-based instrument like cap and trade.  To an environmentalist like myself the cap and trade is not nearly aggressive enough to curb pollution and the idea that you can buy up permits to continue polluting is maddening.  This seems overly complicated and easy to rig for the multi-national corporations like everything else is.  Some MBI’s I believe in that have had success are those that offer tax breaks to technologically innovative companies or individuals who buy Hybrid cars.  What I want to see is new rules, not a new game.