Government As Scofflaw, On Pollution And Beyond

Government As Scofflaw, On Pollution And Beyond

Cato Institute - Wednesday November 18, 2015

by Walter Olson

It’s a familiar libertarian insight that regulation often holds government itself to lower standards than it does private actors. Pension funds for public employees are mostly immune from the federal solvency and funding requirements that apply to their private counterparts; Federal Trade Commission rules against false advertising by profit-seeking companies do not restrain false advertising by government actors on the same topics; the FTC can fine companies massively for data breaches even as the federal government itself suffers gigantic losses of sensitive data to foreign actors with few career consequences for many of those who had dozed; anticompetitive practices per se illegal under antitrust law become legal when states do them, and so forth and so on.

Now David Konisky of Indiana University and Manuel Teodoro of Texas A&M, in a study published by the American Journal of Political Science entitled “When Governments Regulate Governments,” have pulled together some data:

Our empirical subjects are public and private entities’ compliance with the U.S. Clean Air Act and Safe Drinking Water Act. We find that, compared with private firms, governments violate these laws significantly more frequently and are less likely to be penalized for violations.

More from an Indiana press release via Tyler Cowen:

For the study, Konisky and Teodoro examined records from 2000 to 2011 for power plants and hospitals regulated under the Clean Air Act and from 2010 to 2013 for water utilities regulated under the Safe Drinking Water Act. The study included over 3,000 power plants, over 1,000 hospitals and over 4,200 water utilities — some privately owned and others owned by public agencies.

* For power plants and hospitals, public facilities were on average 9 percent more likely to be out of compliance with Clean Air Act regulations and 20 percent more likely to have committed high-priority violations.

* For water utilities, public facilities had on average 14 percent more Safe Drinking Water Act health violations and were 29 percent more likely to commit monitoring violations.

* Public power plants and hospitals that violated the Clean Air Act were 1 percent less likely than private-sector violators to receive a punitive sanction and 20 percent less likely to be fined.

*Public water utilities that violated Safe Drinking Water Act standards were 3 percent less likely than investor-owned utilities to receive formal enforcement actions.

[After speculating that public operators may find it harder to raise funds promptly for needed facilities improvements:] Public entities also face lower costs for violating the regulations, the authors argue. There is evidence from other studies that they are able to delay or avoid paying fines when penalties are assessed. And officials with regulatory agencies may be sympathetic to violations by public entities, because they understand the difficulty of securing resources in the public sector.

Application of the principle to state-owned industry outside the United States can be left as an exercise for the reader.

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