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benefits of all environmental regulations, they are clearly important. On the basis of current knowledge, it appears that for many regulations, benefits exceed costs.

Furthermore, technology frequently improves, as does our ability to reduce pollution through process change and product redesign. For this reason, the cost of controlling pollution can often fall, thus making some programs that were heretofore prohibitively expensive now attractive as social investments.

Many also are questioning whether the environmental benefits resulting from new controls are as much as they were at the start of the environmental era. Some believe that the law of diminishing returns relative to long-regulated environmental pollutants has begun to set in and that, although added control will no doubt produce gains to society, these gains will sometimes be small in relation to their costs.

Those questions are being asked not only in corporate board rooms—although that is where the questioning might be loudest—but also in city halls, governors' offices, and even in the offices of the Secretaries of federal departments. That is because state and local governments and such federal agencies as the Departments of Interior, Defense, and Energy are also subject to federal environmental regulations. In fact, concerns about the cost of controlling environmental pollutants at the federal and state levels relative to the benefits received led to the recent passage of legislation that makes it much harder for the federal government to write regulations that impose costs on lower levels of government without appropriating funds to help the affected parties comply.

There is ample evidence that the concern is bipartisan. Presidents Ford, Carter, Reagan, and Clinton—two Republicans and two Democrats—issued executive orders requiring that federal regulatory agencies identify both the benefits and the adverse economic impacts of all major regulations and ensure, if relevant statutes permitted, that the benefits of a proposed regulation exceed the costs and the least-costly approach to meeting the environmental objective was chosen. In the 103rd Congress, before the Republican takeover of both houses, a measure to require even more cost-benefit analysis and more explicitness in risk assessment passed in both houses by substantial majorities. By mid-1995, environmental advocacy groups, business organizations, policy experts in academe and "think tanks," and the Clinton administration had all come to agree that environmental regulation needed to be rethought in important respects—even if there was much disagreement about just which respects. At the same time, agreement appears to have been reached on the need for a fair and careful balancing of environmental improvements with their associated costs.

ECONOMIC INCENTIVES VERSUS COMMAND AND CONTROL

It appears that the nation's existing environmental goals can be met for a good deal less money than the country is now spending if we substitute, as appropriate, what have come to be known as incentive-based approaches to environmental



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