The Relative Efficiency of Voluntary vs. Mandatory Environmental Regulations

Conservation program administered by USDA have traditionally been voluntary, with USDDA providing technical and fiscal assistance to farmers. This tradition is continued din the Federal Agriculture Improvement and Reform Act of 1996. Under these programs, farmers commit themselves to adopting a land management practice and, in turn, the government provides technical and financial assistance. Our analysis suggest that these voluntary programs are more efficient than a program that mandates adoption if and only if the per acre social cost of government expenditure under these program is less than the largest per acre farmer loss under the mandatory approach plus the additional implementation and enforcement cost. This necessary and sufficient condition is likely to be satisfied when (a) the deadweight loss from raising the government revue is zero or small, (b) a large proportion of government services is public goods, (c) the area the program targets is large, (d) the price of government services is lower than what farmers would have to pay for equivalent private services, (e) the maximum per acre loss under the mandatory program is large, and (f) the monitoring and enforcement cost is much larger for the mandatory program than for the voluntary program.