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Towards an efficiency interpretation of regulatory implementation lags

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Abstract

Regulatory agencies are often legally obliged to use a cost-benefit rule in revising environmental standards to reflect improvements in pollution-control techniques, but have considerable discretion over the timing of such revision. How should the agency use this discretion? Longer lags tend to encourage more intense R&D effort by the regulated industry itself whilst discouraging parallel effort by external developers. Optimal implementation lags are characterized. The analysis calls into question the conventional view that “footdragging” by agencies is necessarily evidence of incompetence or regulatory capture. More generally, whether or not subject to conscious manipulation by regulatory agencies, the delays routinely observed in implementation may enhance welfare.

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Authors and Affiliations

  1. University of London Royal Holloway College, Egham Hill, TW20 0BD, Egham, Surrey

    Anthony G. Heyes

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  1. Anthony G. Heyes
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Additional information

I am grateful to Robert Cairns, Dennis Snower, David Begg, David Blake, Sandeep Kapur, two referees, and seminar participants at the Universities of London and Oxford for constructive comments on earlier drafts. The usual disclaimer applies.

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Heyes, A.G. Towards an efficiency interpretation of regulatory implementation lags. J Regul Econ 10, 81–98 (1996). https://doi.org/10.1007/BF00133359

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