D Murali

Cost of unlawful action

D. Murali | Updated on November 27, 2011


A question that most of us can relate to is, “Do citizens' actions compensate for the weak enforcement of laws?” Devoting a chapter to this poser, V. Santhakumar writes in ‘ Economic Analysis of Institutions: A practical guide' ( www.sagepublications.com) that poor enforcement of laws, such as of environment, creates social losses, which in turn encourage citizens to act by filing PIL (public interest litigation) or resorting to civil disobedience actions.

The author notes that citizens' action would be socially beneficial if its aim were to create awareness among the victims and to compel political and administrative decision-makers to frame better regulations and to have better enforcement.

If the citizens' role is to alert the enforcement officials, then it enhances the probability of monitoring and enforcement, and can enhance the compliance of environmental laws by the polluting firm, he adds.

Pointing out that firms comply if their expected cost of compliance is less than the expected cost of violation, Santhakumar acknowledges that the citizens' alertness can increase the probability of monitoring, and hence for a given level of fines, one can see a higher cost of violation for the firms and thus more compliance. “Similarly, if the citizens' role is to see that the polluting firm does not get away with bribing enforcement officials, this too can enhance efficiency of overall enforcement of environmental regulations.”

He reminds, however, that since public enforcement is weak in developing countries, it will not be adequate even if enforcement officials are alerted and informed by the active citizens.

Importantly, the book identifies a major source of institutional failure in developing countries, viz. the absence of speedy and cost-effective conflict resolving mechanism. Fretting that it is not uncommon to see court cases taking decades to arrive at a decision or settlement, the author observes that when courts have attempted to resolve issues, objections have been raised or higher courts have been approached. An example he mentions is of how a high court order in a wetland reclamation case was challenged in the Supreme Court.

“This was then referred back to the high court which gave a similar order to the first. This was then appealed against for a second time at the Supreme Court. The aggrieved party subsequently filed the cases twice more at the high court…”

Of topical relevance is the section on ‘cost of unlawful action,' because ‘unhappy' citizens may resort to acts such as demolition of equipment, prevention of transportation, gathering in front of a factory, breaking structures and so on. Alerting that if the institutional and legal environment is such that the ‘cost' of taking ‘unlawful' action is low, then one will see more such actions, the author underlines that the cost borne by a single individual can be very low when a large number of people are involved in these actions.

The book addresses many other critical questions of institutional significance, be they about self-financing colleges or public water supply, agricultural research or immigration regulation.

Recommended for an in-depth study, in the interest of effective governance.

Published on November 27, 2011

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