Think local: When and for which environmental problems?

Friday, July 1, 2011

Proponents of free market environmentalism do not usually invoke government as part of the solution to environmental problems. But when they do, free market environmentalists promote governance by the smallest entity possible. PERC, for example, advocates using land trusts or endowment boards to help manage public lands. Arguments for smaller government imply that local control will produce better environmental policy because representatives are closer to their constituents and, therefore, more responsive. It is also argued that competition between multiple smaller governments leads to better policy outcomes. When governments compete, constituents win.

Is Local Always Better?

There are typically three arguments given for local representation offering better solutions to environmental problems. First, local governments better represent local interests; and there might be shared values between local interests and the interests of free market environmentalists. Regarding the management of the Grand Staircase–Escalante National Monument, for example, many locals preferred less governmental supervision of the land and free market environmentalists were recommending an administrative trust arrangement. But this alignment of interests ought to be thought of as subject to change, or even accidental. Moreover, this representation of local interests might instead facilitate overexploitation.

Consider the case of a fishing stock shared by two localities. Each local jurisdiction might, depending on the alignment of interests, have the incentive to overexploit at the expense of the other jurisdiction. Clearly this would be the case if both local governments represented fishers. Each would have the incentive to overfish—to snag the fish before the other locality could do so. Thus, with public good problems that cross political boundaries, the tragedy of the commons brought about by individual decisions can simply be replicated by the decisions of local governments. Consequently, this reasoning should be put aside as a convenient but ultimately unconvincing argument for local control.

The second, and more compelling, argument for local control is that representation of local interests produces better environmental outcomes. Favorable environmental outcomes might come about because of superior local understanding and knowledge of an environmental situation. This is the reasoning invoked by arguments against “one-size-fits-all” command-and-control solutions to environmental problems. For example, residents might know where the spawning grounds of the fishery are and be able to encourage the local government to limit fishing in those grounds. Nobel laureate Elinor Ostrom argues that, for small common pool resources, this localized knowledge plays an important role in designing the appropriate institutions to govern and enforce the rules regarding the resource.

Given the role of localized knowledge, it seems clear that a more appropriate argument than to simply prefer local over state control and state over national control is to match the size of the government to the size of the environmental problem. If the size of government was infinitely customizable to each issue, it should be no larger than the size of the problem. Governments of various sizes, however, are costly to set up, so choices must often be made from a discrete set of levels. With this consideration in mind, optimal jurisdiction size can actually be larger than the scope of the problem since it might be necessary to choose federal over state management for a regional problem.

The third argument for local government as preferable to larger governments is that multiple jurisdictions can facilitate competition, even for public goods. As the Tiebout model explains, people can choose which jurisdiction they prefer by voting with their feet. This process encourages local governments to provide quality public goods. This is perhaps easiest to see in the market for houses near high-quality public schools, but it also seems to hold in the environmental arena. Economist and PERC fellow Spencer Banzhaf and his colleague Randall Walsh recently found that areas around large industrial facilities with high levels of pollution experienced population decline, while neighborhoods that cleaned up gained population. This movement of people, and potential voters, gives local governments the incentive to provide public goods.

It is unclear, however, whether a causal link from governmental competition to good governmental policy can be established. Competition as a source of good governmental policy would require that politicians respond to the effects of people moving (e.g. lower housing prices, loss of population). In other words, the movement of constituents due to the underprovision of environmental public goods must translate into more difficult political reelection prospects. But this link is unclear and limited by the very movement of people. In the example of the fishery, a locality that sets fishing quotas too high would have to observe conservationists leaving and feel an electoral impact. But if those who are leaving are exactly those who oppose the policy, it leaves proportionately more fishers and no incentive to change the policy undermining the link between better environmental policy and competition. The competition can result in more variation in policy outcomes than would a more centralized form of decision making, particularly if heterogeneous preferences are involved. But there is not an electoral reason to believe that it will lead to better environmental policy.

On the Table

Evaluating these three arguments leaves several open questions. If local governments represent local interests better, does this necessarily lead to better environmental policy? If the environmental problem is sufficiently large, local representation could easily serve to replicate the tragedy of the commons at the governmental level. Each local government would have the incentive to overexploit a common pool resource shared by another jurisdiction, prompting the same environmental problem that government is often tasked to solve.

One way to rephrase the maxim of harnessing local control to avoid an extension of the tragedy of the commons might be to argue instead that the boundaries of government ought to match the boundaries of the problem. Drawing boundaries that encompass the interested groups would help to ensure that no major participant is left without an opportunity to counter the other groups. And the heterogeneity of interests in larger populations would help to reduce the possibility of one faction organizing at the expense of the others. Of course, political boundaries rarely coincide with boundaries that would facilitate good management of natural resources (witness state boundaries drawn in the middle of rivers). This recommendation could prove difficult to implement in practice.

The second question left unanswered relates to competition between governments. If multiple competing jurisdictions are thought to bring about better environmental policy, what is the mechanism for this improved decision making? Do politicians respond to the movement of constituents by more efficiently allocating resources? If those who oppose the policy are those who move, then individuals might be well-represented in terms of living in areas where the policy matches their preferences, but it is not clear that this process has produced better environmental policy. Moreover, as those concerned with environmental justice have pointed out, the inequality implied by this distribution of resources may be problematic.

This brief analysis offers some insight into answering the question of when and for which kinds of environmental problems local control is preferable. For localized problems, there appears to be no strong argument against local control. The local boundary encompasses the relevant interests and the externalities are fully internalized. Particularly if there is specialized local knowledge, the outcome from a local government is likely to be better. But for larger problems, larger governments are more likely to take into account broader interests and to avoid pushing the tragedy of the commons up to the governmental level.


Does smaller government always produce better environmental policy?

For local problems there is no strong argument against local control. The local boundary encompasses the relevant interests and the costs are fully internalized. But if the environmental problem is sufficiently large, local representation could serve to replicate the tragedy of the commons at the governmental level. Each local government has the incentive to overexploit a common pool resource shared by another jurisdiction, prompting the same environmental problem that government is tasked to solve. For larger problems, larger governments may be the best option.



Sarah Anderson is an Assistant Professor, Bren School of Environmental Science and Management, University of California, Santa Barbara and was PERC Lone Mountain Fellow in 2007. She can be contacted at [email protected]
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