Framing Effects and Regulatory Choice

Abstract

Behavioral law and economics suggests that the ways in which a choice is framed will have an effect upon the choice that is taken. The literature has yet to take proper account of the impact of framing effects in a standard legal setting faced by policymakers - the question of which regulatory instrument to employ to achieve a given policy goal. This Article analyzes the ways in which the framing of regulatory options may have an impact upon the ultimate regulatory instrument choice. The Article uses as a case study the underutilization of market-based regulatory devices in the area of environmental control, and demonstrates that regulatory framing effects contribute to the continued dominance of command-and-control regulation despite the advantages of market-based regulatory forms. The Article identifies three framing effects that render market-based regulatory instruments more susceptible to criticism than their command-and-control counterparts. First, market-based regimes tend to deemphasize the role of government, identifying the government only as the source of pollution rights that are distributed to societal actors. Second, market-based instruments are seen to partition the pollution emissions of societal actors from the socially beneficial activities that the actors undertake. Third, while command-and-control regulations are seen to impose limits or restrictions on polluters' ability to pollute, market-based regulation tend to depict polluters as receiving anew the right to pollute; in this sense, market-based regimes are framed as achieving an environmental loss. A careful examination of various environmental regulatory tools reveals that these effects are grounded in framing, not reality. Nonetheless, they provide the basis for criticisms, such as the "right to pollute" and "commodification" critiques, that have been lodged successfully against market-based regulatory forms. Thus, these framing effects have influenced the choice of regulatory instruments. Having established the effects of framing on environmental instrument choice, the Article proceeds to recommend ways in which the frames of market-based instruments might be changed so as to reduce the barriers to their implementation that result from framing effects.

Keywords: Behavioral Law and Economics, Framing Effects, Administrative Law, Environmental Law, Instrument Choice, Commodification, Right to Pollute; Market-Based Instruments

JEL Classification: K23, K32