Endogeneity and Environmental Policy: How Local Institutions Structure Local Demand

Tao, Jill L., International Journal of Economic Development

Abstract

One of the central themes of local government in a federalist system is the concept of nested institutions, where local governments operate within an environment of constrained policy options. Recent work in the field of environmental economics has highlighted the difficulties that arise when trying to assess the public's taste for different policy options when the public's experience is constrained or limited. Local governments in a federalist system thereby offer a unique environment for examining constrained publics and the problems that may arise when dealing with endogenous policy alternatives. This article draws on the recent literature on local institutions and environmental policy to develop a model for explaining local government behavior, and uses a case to illustrate the model's application. I conclude that traditional models of policy analysis may require some translation for realistic application to local governments

Introduction

Evaluating the impact of local government policies within the United States has been a perennial source of innovation and frustration for academics and practitioners alike. Such sentiment is often attributed to the difficulty encountered when searching for appropriate outcome measurements for local governments within the larger state and national policy arenas (Bartik, 1991; Hatry, et al., 1990). Nested institutions and the bundling of services can lead to muddled evaluations of local influence, leaving local policymakers with a limited ability to demonstrate progress towards community improvement goals (Reese and Fasenfest, 1999; Tao and Feiock, 2003).

In these discussions, economic development policy has often been singled out as a policy area that poses unique challenges for local government because of classical and neoclassical assumptions about the behavior of markets in general (Tiebout, 1956; Peterson, 1981). However, recent work examining questions of political economy within a federalist framework has raised the question as to whether other policy areas, such as growth management, land usage and environmental regulation, may be just as prone to such challenges (McCabe, 2000; Clingermayer and Feiock, 2001). This literature focuses on the way in which local policymakers utilize institutional arrangements, such as the creation of special districts or the adoption of "reformed" government structures, such as council-manager systems, to achieve particular policy goals in a wide variety of areas.

One of the consequences of these structural choices, however, is the establishment of institutions that may outlive their progenitors and policy goals by a lengthy period of time. This article will examine two potential outcomes that may result from such institutional choices at the local level: first, the addition of yet another layer of constraints on the actions of local governments to those already present within the difficult issue of "nesting"; and second, and perhaps more importantly, the way in which such choices structure the preferences of local residents for certain types of policy. I will examine these outcomes within the framework of endogenous preferences, or locally rational affection, that develops in both local policymakers and their constituents for certain policy outcomes, and will demonstrate how such a framework might explain decision making behavior at the local level on environmental issues. The consequences of such behavior for environmental outcomes will then be discussed and evaluated.

The Case for Local Environmental Policymaking

Local governments are often considered the first and the last lines of defense in battles against social ills and problems of collective action. This is especially true for environmental problems brought on by urban conditions, where the burden of responsibility for action has long been placed at the local level (Kraft, 2000; Ostrom, Schroeder and Wynn, 1993). As Michael Kraft points out in his discussion of the history of U.S. environmental policy and politics, "[F]ederal environmental policy was only slowly extended to control of industrial pollution and human waste. Air and water pollution were long considered a strictly local matter, and they were not high on the national agenda until around 1970" (Kraft, 2000: p. 21). The proximity of problems such as waste disposal and the provision of clean water to local governments and the resultant need to address such problems at the local rather than federal level seems obvious in retrospect (Luton, 1996). Yet the association of such issues with public health rather than environmental concerns contributed to a perception of disjuncture between local governments and environmental issues until relatively recently (Kraft, 2000).

Environmental policy at the local level, when considered at all, has generally been typecast as a local government response to groups opposing rapid urban growth. This framing of local environmental issues has been due in part to the confluence of two very different bodies of literature. The first has been the urban planning and politics literatures and their examination of how local governments can anticipate (and thereby plan for) problems associated with rapid, unchecked growth (DeGrove, 1984; Logan and Molotch, 1987; Vogel and Swanson, 1989; Deyle and Smith, 1998; Wernstedt, 2001). The second has been the literature within public administration and political science examining the development of a federal approach to environmental policy (Mazmanian and Sabatier, 1989; Ostrom, Schroeder, and Wynne, 1993; Ringquist, 1993; Eisner, Worsham and Ringquist, 2000; Kraft, 2001b). Although this latter literature often focuses on the role of state and federal agencies and institutions, the examination of local policy impact or the importance of local cases in shaping policy has often been key. The urban studies literature has merged these two bodies with concerns that have traditionally been the hallmark of local politics, economic and community development, to create a unique standoff between the politics of growth (including planned growth) and the politics of grassroots environmentalism, or antigrowth.

Placing local environmental policy within such a framework has shaped the discussion by scholars of such policies in an interesting way. The language of tradeoffs is prevalent, where economic development is often pitted against environmental protection or aggressive growth management, where the adoption of either policy type is framed as a zero-sum game (Logan and Molotch, 1987; Vogel and Swanson, 1989; Ringquist and Feiock, 1998; Feiock and Stream, 2001). This is partly due to the way in which federal environmental policies have been portrayed, where clearly the politics of growth and the politics of conservation are at odds (Commoner, 1990; Rifkin, 1991) and where there are marked differences in the way in which the major political parties offer their respective stances on these issues (Herron, Lavin, Cram and Silver, 1999). At the local level, however, the evidence that such tradeoffs exist is mixed, especially if environmental policy is expanded to incorporate current trends towards creating "livable cities" through the adoption of local policy tools. Such tools often include initiatives to incorporate planning for greenways and open space in redevelopment areas or in new developments, as well as funding schemes for improved infrastructure, such as construction-based fees meant to curtail costs to a community imposed by new development.

In this way, local governments can be seen as taking a broader view of the needs of Tiebout's median taxpayer. Labor and capital have long been assumed to be mobile, not necessarily loyal to the politics of place, and local governments have attempted to thwart mobility when it proves costly (loss of median taxpayers), but encourage it when there are gains to be had (gain of median taxpayers). Therefore it stands to reason that local governments who perceive a link between attracting (and retaining) median taxpayers and improved "livability" will attempt to find a compromise between what have otherwise been perceived as competing policy approaches. However, their attempts to do so will be constrained by the unique conditions imposed by federalism.

"Nested" Local Institutional Settings

One of the most common observations about local governments in the United States is their status at the bottom of the federalist constitutional totem pole, where power is fragmented and diffuse, creating what Seidman and Gilmour have referred to as "cooperative feudalism" (Schoettle, 1990; Seidman and Gilmour, 1986). As such, local governments have been conceived of as "nested" institutions, constrained by rules at the …

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Publication information: Article title: Endogeneity and Environmental Policy: How Local Institutions Structure Local Demand. Contributors: Tao, Jill L. - Author. Journal title: International Journal of Economic Development. Volume: 4. Issue: 3-4 Publication date: July-October 2002. Page number: Not available. © Southern Public Administration Education Foundation 2007. COPYRIGHT 2002 Gale Group.

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