Transaction Cost Reduction or Rent-Seeking in Provision of a Public Good

This chapter reviews the legislative history of the Clean Air Act (CAA) and the role of rent-seeking in affecting key aspects of the law. These aspects include uniform ambient air quality standards across a large, heterogeneous country; the prevention of significant air quality deterioration, even in areas above the national standards; and a new source review that requires the best available pollution control technologies in new facilities also in areas with air quality at or above the national standard. These policies might seem reasonable, except that they impose costs on sections of the country where there may be little corresponding net benefit. The question then arises as to why the CAA is structured in this manner. Are there transaction cost savings arising from these rules? Or are they better explained by rent-seeking among politicians, agency officials, industry and labor lobbyists, and environmental nongovernmental organizations?