ABSTRACT
By the mid-1980s, fish tissue studies conducted in the Great Lakes Basin suggested that earlier declines in contaminant levels of bioaccumulative pollutants (such as PCBs, DDT, and dieldrin) had leveled off Without new policy initiatives, many uses of the Great Lakes would be threatened. Alarmed about the effects of these pollutants on the ecosystem as well as anglers and other consumers of local fish, the Great Lakes governors agreed to take common action, thereby eliminating the incentive for industry to pressure individual states for leniency. In 1990, the Clean Water Act was amended to require that EPA promulgate the Great Lakes Water Quality Guidance for all eight states and thereby create a level playing field among the Great Lakes states. The benefits and costs of EPA’s guidance were evaluated in a regulatory impact analysis (RIA), completed in early 1995.
The Great Lakes case, as the authors of this chapter show, highlights a number of issues critical to developing a quality economic analysis, particularly in a highly charged political environment. First, estimating the economic effects of a regulation that affects multiple industries is a particularly challenging task. Second, when a large portion of the pollution likely derives from non-point sources it is crucial that these sources be represented in the 420 analysis. Failure to do so may cast doubt on the credibility of the effort, including the efficiency of proposed solutions. Third, when the overwhelming benefits of a regulation turn out to be recreational as opposed to health related, contingent valuation studies become a necessary but controversial part of the analysis. Fourth, initiating an economic analysis late in the process obviously limits the opportunity to use the RIA to select economically efficient solutions. Finally, as opposed to a national analysis where accuracy is only required “on average,” a great deal more precision is required to assess the benefits for a particular region.
