The problem is one of internalizing cost into the decision maker objective.

It happens whenever the cost bearer has limited entitlement to receive compensation (impose the cost into the decision maker). The fact that there exist incentive to collude between regulators an operators is a consequence of a miss organization  

There are plenty of possibilities of making it work with different degrees of internalization impact, and organizational costs (enforcement cost , miss conduct cost).

Usually environment property rights are said to fall on the community. Then the community is said to be represented by the State (read "person who runs the government"). Consequently the "distance" (the ability to transfer the cost) between the entitled, and the cost bearer is large enough, not to obtain any good result.  

Think of ways to narrow that distance.

For example: Anyone who is  bearing the costs (and can prove it somehow) is entitled to require personal compensation from the polluter.   

Also, as the harm is a public cost (affects simultaneously to all), the fact that someone is suing will not be a deterrent for any other person require its own compensation as well. Putting a prize to proving environmental harm, 

When this theoretical approach goes to the field it can be settled as last resort instrument (threat) to enforce regulators.

Of course going to the field requires you to have a good answer why this kind of solutions  are not taking place.

PD: I put bold letters in ANYONE and last resort threat  because both concepts  generally apply  to  any effective  control system design.

This analysis is a part of a general project I am working upon called Architecture of Value. A.VA. foundation. If you use some of tie insight don´t forget to cite the AVA reference.   

Certainly Mr.Oscar. Thank you.

Dear Oscar,

I am intrigued by the response you give and your interest in developing an architecture of value.  The understanding of what value is and what it is not is fundamental to the whole of human society and to any sensible dialogue concerning structure, process and organisation. Points which I am sure you well appreciate and which you know that I do also.  Thank you for following me, as I will now also follow you.  I am currently busy getting my website acceptable for visitors and aso preparing as 'discourses' under Creative Commons licence many drafts of the chapters of a larger body of work to be completed one day.  These first thoughts necessarily lead into, and include, discussion of value.  I believe that we may be doing work which is mutually beneficial and convergent.  I look forward to reading your own work. regards...  Rob Jarvis

@Vijay:  The framework within to understand collusion between corporations and regulators can only be understood in terms of a framework that realistically positions players within the socio-economic context in which it occurs.  This is so because collusion is an expression of the power created by two parties with different skills cooperating towards a common goal with the objective of gaining for themselves some benefit or service from other parties that would not have been accessible to them except through the creation and exercise of that power.  In other words the cooperation has as its object the exploitation of others.. see Risse's 2015 or 2014? paper to understand exploitation. I cited it recently in one of my other answers to questions elsewhere.

I am sorry for you that the necessary analytical framework is not one of economic theory, in the mainstream sense. But the sad fact is that mainstream economic theory itself is to a large extent a very expensive exercise in rationalising the illegitimate exercise of exploitative powers that are realised and operated through the conceptualisation, creation and operation of a web of economic, judical, political and metaphysical institutions that characterise the paradigm which you are now engaged in questioning.  I wish you well.  Be honorable, be brave and be diligent.

Dear Prof.Robin Edward Jarvis,

                                              Although I do not disagree with your overall view, however, I see a need to explain the question I am raising. Scientific knowledge creation as an industry has been making certain claims to its ability to self-correction when faced with fraud, specifically fabrication of facts to generate misrepresentation of the reality in question. Misrepresenting environmental quality through fabricating environmental impact assessment by regulatory agencies to protect polluting private corporations can be an illustration. The collusion between corporations and the regulators would stand exposed if the self-correction argument were true. And collusion has strong economic interests underlying it and multiple or even divergent economic outcomes for various economic agents, who may or may not be part of the collusion. The only way science and knowledge can coexist with collusion is in its fraudulent form. And in the context where what you term as rationalization of illegitimate exercise of exploitative powers happens, does scientific knowledge production always necessarily evolve towards challenging it and undoing fraudulent science, that gets produced for rents? Economics all said and done is not a hard science. There are always claims and counter claims, room for interpretation, value biases, etc., without an objective closure. With respect to hard science, if such rhetoric emerges, unless there is a genuine cognitive constraint, the problem must be one of scientific misconduct. If scientific misconduct were enormously profitable, can science driven by market overcome it, if the outcome were to protect public interest but was not very fetching? This is the central question I would like you to address. Thank you.

Best Regards

Vijay 

Dear Vijay,

I have no title!  Robin is fine.  My apologies in the delay in responding.

I am sure that you are aware of some of the 'bad news' stories of intimidation and misrepresentation that have and are occurring in the biological engineering industries so I will try to be clear without naming names. :-)

Oscar rightly focusses on the structural context of the behaviours of concern as being seminal to determining what mechanisms might be employed to circumvent the intended effect of regulation, legislation and oversight.  These define and give reality to the relationships of power that will exist in a situation, these in turn are a determinant of the likelihood and scale of the cost of circumvention behaviours and of any negative impacts the necessity of taking a circumventory route may have upon the realised value of the project's eventual benefits.   This context will also, in every case identify circumventory alternatives. 

Firstly, to the potential perpetrators for whom these will be the usual list of business alternatives to which probabilistic weights will be applied according to their individual risk assessments and from which final list the optimally beneficial strategy will be identified.

Secondly, you would need to be able to create a simulation of the same processes, with less information and little if any psychological profiling of what might in the end be perfectly innocent agents.  You would want to do this to limit the potential costs to the analyst in eventually doing the footwork that will confirm or reject the hypothesis of collusive circumvention being present.

If am not completely clear by your meaning in the key question statement. I have highlighted the phrases that I would like you to expand upon and clarify: "

If scientific misconduct were enormously profitable, can science driven by market overcome it, if the outcome were to protect public interest but was not very fetching?

I will say however that you must remember that science is not the prerogative of agencies external to the commercial, nor the regulatory, players.  They both also have their own in-house facilities and they also fund, in one way or another, most of the science that takes place in what you perhaps imagine to be the sole domain of altruistic scientists and bureaucrats.

As Oscar indicates in his comments, for economists to describe and promote analytical frameworks capable of rectifying the behavioural shortcomings of nearly all of the economic agents that operate across our planet, from the least to the greatest, one necessarily has to first question the most fundamental principles upon which the paradigm operates.  These principles, although they may be as ancient as man himself, first began to be clearly presented by Adam Smith and then Ricardo over 220 years ago and, tellingly, the question of Value was central and immediately that led to considerations of value ownership and hence of Rent.  The whole modern commercial paradigm is based upon obtaining Rent from owned Property.  Circumvention of environmental regulations and the no-cost utilisation and destruction of public goods, through pollution or consumption, are simply new behaviours which have appeared because previously there were no or few regulations to circumvent when employing the same business strategies for maximising the Rent / Profit from applying labour to the physical and non-physical properties of the business.   Labour in the world of Smith and Ricardo, even in the Greek and Roman worlds, in essence came by definition from people who had no property of their own to which they might apply their own labour and also obtain rent.  Consequently the idea that public goods might actually belong as much to them as to those who did actually own property of a more tangible and discreet character never arose and would have been laughed at if it had.

The fact that today our morale code has changed and that you are now asking these questions and are considering how to ensure compliance with a section of it demonstrates that a dissonance has arise between the paradigm under which we now aspire to live and that which actually does exist.  Incumbent paradigms have all Power, with a very big 'P', and do not take kindly to being supplanted by another.  Especially one which is possessed of so little Power irrespective of it having the potential support of 99% of the global population.  

As far as the incumbent paradigm is concerned, or 'the Eminent Domain' as it seems our Indian colleagues carefully refer to it, it is seen that within it is recognised that in reality if not in neo-classical theory the value of an asset is zero if it cannot be worked by labour since in that case no rent can be obtained from it. 

In other words maximisation of property rents, aka maximisation of profit, necessarily requires the existence of a societal infrastructure which assures two things.   These two things are the availability of labour to create value flows from the working of property which labour itself does not own (and which would in that case result in rent for themselves) and secondly it requires that labour, generally, buy and consume the final products which are the ultimate result of all the work done by all labour upon all utilised properties.

The process described in the previous paragraph is an organisational element in the real system which is central to the societal infrastructure necessary for 'properties' to produce 'rent' and thus for them to be imbued with 'value'.  Moreover, since the amount of rent produced in working an asset, and hence its value, can only be maximised through minimising the costs of working the property then it follows that, in global aggregate, the population must remain broadly divided between those who own properties and earn rents, and those who own nothing and are in a position where they will always be willing to work for the least that is offered while pay for their necessary consumptions at the highest prices they will bear.

Just as in civilisations long gone,there is however a 'third grouping' that is required in the infrastructure. The requirement stems not from the logic of property and production so much as from the motivations for producing rent, accumulating property and for maintaining the societal infrastructures which give value to them.  To be worthwhile to the holders of value it must be translatable into either services which relieve them of some tedious or time-consuming activity they would rather not do or demonstrate in some way, ostentatiously or subtly and forcefully, that they do own valuable property.  The greater accumulated wealth appears to grow, the greater is the demand for those non-essential services and useless items of consumption which announce it.  An increasingly large 'service' sector of labour comes into being, one which is beyond the practical needs of the standard productive processes.  It is also one which tends to be paid as much on the basis of what the buyers will pay, where frivolous ostentation is the motivation, as it is upon how little the suppliers will work for, where a quiet consumption of items of only the highest quality and demanding the most painstaking hand-construction or artistry and design is the motivation for wealth.  So that in time this part of the service sector itself becomes the source of demand for the same 'tat' products and services in emulation of their clients, but at a lower cost level.  These consumers can then be held up as role models in persuading the lower paid to consume similar goods, or basic goods that have been presented with similar connotations of 'status' at prices and high profit margins that confirm this.  Under marketing pressure this inevitably leads to substitutive product choices which are very often to the detriment of their consumption of basic more well-advised and healthy components of a life-style that would result in a more holistic well-being if it had been followed.

One can easily see from this that any 'fortunately' endowed nation state that grows wealthy will inevitably find that as its wealth grows and as providers of services to the most wealthy increase that section will also increase and so on such that a point comes where a shortage of low-paid workers will develop.  Before rapid technical development began to introduce the tools that provided regular increases in the productivity of labour, and more property to earn rent from, this shortfall could be solved by enslaving the work time of people of other nations or by trading their work for products with high value to those workers locally within their cultural value system but which required little work by people in the wealthy nation but which got back in return labour intensive goods of high value to them.  But this required military protection of this 'resource of beneficial exchange' from other wealthy nations.  It needed empires to be built and to be defended.

But overt slavery was abolished as morals changed amongst the 'new rich', and militaristic empires became unsustainable on a cost-benefit basis.  However, a new technology could be substituted...  Foreign trade based upon manipulated currency values in speculative 'exchanges' and in units which were benchmarked against those of wealthy nations ensured that the 'terms of trade' maintained the infrastructure of property ownership and use needed for ascribing value to property value.

But this too became less effective and difficult to control in any stable fashion, but it had given rise to some very large companies, operating internationally, and owning elements of their own integrated value-chain across many nations and their resources and whose homes were in the wealthy nations themselves.  This provide the mechanism whereby production could be optimised around the world such that, in relation to the home country of a firm, its production could always be concentrated in those other countries where wage and other production costs were lowest. And could do so with little or no effective interference from any of the other countries involved... except those home countries of competing large international 'globalised' firms or associations of firms.

Today there are many of those, too many such that suitable production locations with 'virgin' low wage and cost structures have become increasingly scarce and globalisation is now a mature technology.  In this process one might see the growing definition of trading groups of nation states clustered around just a few wealthy ones as being just another stage in the globalisation phase of developing and sustaining the production and consumption infrastructure required by the neo-classical model. 

Is there another dynamic which will continue and preserve this societal difference between the owners of productive property and rent receipts and the providers of the labour which gives them value?  An imminent round of greatly enhanced productivity in the use of both resources and of labour through a huge jump in technological capability has been mooted.

As this develops two things will happen.  Robots will become the under-paid underclass and unemployed humans will need to receive a large part of the rent that the robots facilitate so that they are able to consume the products which they then make.  But only individually as little as absolutely necessary, and only while our over-provisioning in that resource is worked down.  Quite bluntly, only so long as it takes to significantly reduce the global population down to the comfortable few needed to provide the 'tat' services demanded and which robots cannot.  But even some of these will be done by humans, like butlers and maids, because to such 'tat' will attach 'status' value simply because they are being provided by an 'expensive' human, rather than by a 'cheap' robot.

Secondly and importantly for the question at hand...  Resource consumption and attendant pollution issues will greatly reduce because of the technological changes that are mooted in this generation.  The issue will start to go away and become smaller-scale and as such government and business will be more ready and willing to no longer attempt to collude in circumventing them.

Will this scenario be too late? Perhaps.  But it is one that The Forum For The Future business grouping believes in and is what will drive them to continue to be intransigent in resisting pressure to act.  They will happily procrastinate.  They might not be so happy about the neo-classical characterisation of their behaviour and actions, nor regarding the analysis which shows that the systemic institutionalisation of inequality is a necessary component of the current dispensation we work under.

The future might look good, for the surviving few, but will well-being have been established and improved? Universally and individually?  No because all the externalised components of well-being remain external.  Humanity may then believe them to have well-being... a  well-being defined in the positivist reduced terms allowed for by Smith's Economic Man but they will still in actual fact have now assurance of continuity in any durable, resilient, sustainable and enduring way.  Vulnerability to catastrophe will be heightened due to lack of diversity and of complexity within the society and ultimately in the flexibility that these attributes bring with them.  The final winning families will also be very, very lonely as they too slide into extinction.. even without the help of any unforeseen external catastrophe.

And on that cheerful note, I bid those who have stayed the course 'Adieu'.  There is a better way and we can all work on it.