Coasean blind spots: Charting the incomplete institutionalism

Georgetown Law Journal

Volumn 98, Issue 4, 2010, Pages 863-919

  Macey, Gregg P ^a,b  

^a FORDHAM UNIVERSITY   (United States)

^b UNIVERSITY OF VIRGINIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 77954053757     PISSN: 00168092     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (415)

1. Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089 (1972).
2. See, e.g., Daniel C. Esty, Environmental Protection in the Information Age, 79 N.YU. L. REV. 115, 124 (2004);
3. Daniel A. Farber, The Story of Boomer: Pollution and the Common Law, 32 ECOLOGY L.Q. 113, 143(2005).
4. Studies of nuisance law rely heavily on "Boomer-like examples." Carol M. Rose, The Shadow of The Cathedral, 106 YALE L.J. 2175, 2175-76 & n.6 (1997)
5. (describing use of stylized versions of Boomer v. Atlantic Cement Co., 257 N.E.2d 870 (N.Y. 1970), in articles comparing the use of "property rules" and "liability rules" to protect the rights of residents living near an industrial facility).
6. See, e.g., Ian Ayres & Eric Talley, Distinguishing Between Consensual and Nonconsensual Advantages of Liability Rules, 105 YALE L.J. 235, 237 (1995);
7. Abraham Bell & Gideon Parchomovsky, A Theory of Property, 90 CORNELL L. REV. 531, 590 (2005);
8. Louis Kaplow & Steven Shavell, Property Rules Versus Liability Rules: An Economic Analysis, 109 HARV. L. REV. 713, 721 (1996);
9. Stewart E. Sterk, Property Rules, Liability Rules, and Uncertainty About Property Rights, 106 MICH. L. REV. 1285, 1290-92(2008).
10. See, e.g., RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 57 (4th ed. 1992);
11. Daphna LewinsohnZamir, More Is Not Always Better than Less: An Exploration in Property Law, 92 MINN. L. REV. 634, 689 (2008);
12. Henry E. Smith, Property and Property Rules, 79 N. YU. L. REV. 1719, 1721-23, 1732-36 (2004);
13. Sterk, supra note 4, at 1290.
14. See, e.g., Daniel C. Esty, Toward Optimal Environmental Governance, 74 N.Y.U. L. REV. 1495, 1540-41 (1999) (arguing that as information costs decrease, "so do transaction costs, bringing us closer to the day when a Coasian world of informed, low-cost exchanges of rights becomes possible," meaning market controls will become more substitutable for regulatory restrictions);
15. Kaplow & Shavell, supra note 4, at 713, 750-51 ("Another implication of our analysis is that pollution taxes are preferable to the system of tradeable pollution rights that is in partial use today.").
16. Regulatory comparisons are often fit problematically within a single quadrant in Calabresi and Melamed's now-ubiquitous entitlement protection box. See Ian Ayres & Paul M. Goldbart, Optimal Delegation and Decoupling in the Design of Liability Rules, 100 MICH. L. REV. 1, 3 (2001);
17. see also Rose, supra note 3, at 2191-92 (arguing that Kaplow & Shavell's analogy of command-and-control environmental rules to "property rule" solutions is incorrect and that such rules would more accurately be categorized as liability or inalienability rules).
18. ROBERT COOTER & THOMAS ULEN, LAW AND ECONOMICS 93 (3d ed. 2000) (presenting the "normative Coase theorem," which states that the law should be structured so that it "remove[s] the impediments to private agreements");
19. David M. Driesen & Shubha Ghosh, The Functions of Transaction Costs: Rethinking Transaction Cost Minimization in a World of Friction, 47 ARIZ. L. REV. 61, 69 (2005) ("[S]cholars endorse the view that the choice between property and liability rules should reduce the transaction costs of bargaining around judicial decisions.");
20. Yang Wang, Now, Later, or Never: Applying Asymmetric Discount Rates in Nuisance Remedies and Federal Regulations, 105 MICH. L. REV. 2035, 2059 (2007) ("[T]he choice between property rules ... and liability rules ... largely turns on the level of transaction costs anticipated in transferring an entitlement protected by a property nue.").
21. For example, we learn that when there is a single plaintiff and multiple defendants or vice versa, bargaining among the parties will prove difficult due to holdout and free rider costs, meaning there will not likely be an exchange of entitlements protected by a property rule. Therefore, liability rules should be applied. Calabresi & Melamed, supra note 1, at 1106-08.
22. But see Sterk, supra note 4, at 1290-91 ("[I]n a pollution dispute, if the court awards damages that exceed actual harm, the polluter will stop polluting even though it would be efficient for the polluter to continue, while if actual harm exceeds the damages awarded, the polluter will continue to pollute even though the pollution is inefficient. As a result, a liability rule guarantees efficient results only when damages are equal to actual harm.").
23. R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 4-8 (1960).
24. See R.H. Coase, The Nature of the Firm, 4 ECONOMICA 386, 386-87 (1937) [hereinafter Coase, The Nature of the Firm]. Coase's exploration of institutions began with his observation that markets and firms perform the same function (production of goods and services) yet continue to coexist Id. at 388. This suggests that at times, the costs associated with operating within a market (such as the costs of negotiating contracts) will prove significant, leading a company to regularize some of those market negotiations by bringing them in-house (the famous "make-or-buy" question).
25. Id. at 390-92. Institutions continue to serve as the protagonists in new institutional economics. Coase argues that "[i]t makes little sense for economists to discuss the process of exchange without specifying the institutional setting within which the trading takes place, since this affects the incentives to produce and the costs of transacting."
26. R.H. Coase, The Institutional Structure of Production, 82 AM. ECON. REV. 713, 718 (1992) [hereinafter Coase, Institutional Structure].
27. What is widely regarded as the "Coase theorem" is the notion mat in a world with zero or very low transaction costs, "the allocation of resources is independent of the initial assignment of property rights." Deirdre McCloskey, Other Things Equal: The So-Called Coase Theorem, 24 E. ECON. J. 367, 367 (1998) (internal quotations omitted). The true implication of Coase's work is that where transaction costs cannot be removed, it does matter, for example, "where the liability for pollution is placed." Id. at 368. Coase made this central thesis of The Problem of Social Cost clear when he argued that [o]nce the costs of carrying out market transactions are taken into account it is clear that... a rearrangement of rights will only be undertaken when the increase in the value of production consequent upon the rearrangement is greater than the costs which would be involved in bringing it about. When it is less, the granting of an injunction ... or the liability to pay damages may result in an activity being discontinued ... which would be undertaken if market transactions were costless.
28. Coase, supra note 10, at 15-16.
29. Kaplow & Shavell, supra note 4, at 749.
30. James E. Krier & Stewart J. Schwab, Property Rules and Liability Rules: The Cathedral in Another Light, 70 N.Y.U. L. REV. 440, 470 (1995);
31. see also Thomas W. Merrill & Henry E. Smith, What Happened to Property in Law and Economics?, 111 YALE LJ. 357, 381-82 (2001) (reviewing the argument that in large-n situations, liability rules, or entitlements that permit forced exchange in return for the payment of just compensation, are more appropriate).
32. See, e.g., A. Mitchell Polinsky, Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies, 32 STAN. L. REV. 1075, 1109(1980).
33. CHARLES D. KOLSTAD, ENVIRONMENTAL ECONOMICS 109 (2000). Kolstad gives an example of a power plant with the right to pollute an area where twenty people live. The damage to each person from the pollution is $5, and the cost to clean up the plant is $91: Suppose first that the right to pollute is vested with the power plant. The Coase Theorem suggests that efficiency (pollution control) can be attained via payments from the individuals to the plant. Indeed, one possibility is that all 20 people get together, each contributes $4.55 (for a total of $91), and the plant is paid to clean-up.... However, if two people get the idea to free-ride, there is no way the other 18 people can pool money to raise $91 while individually paying no more than the $5 of damage. Consequently, the problems of free-riding combined with private information on damages make it very difficult to reach a Coasian solution.....
34. Id at 110.
35. Good Neighbor Agreement Between the Crockett/Rodeo Coal., Shoreline Envtl. Alliance, Citizens for a Better Env't, & the Unocal Corp. (Apr. 7, 1995).
36. Settlement Agreement & Release Between COPIRG Citizen Lobby, Michael Maes, Lorraine Granado, & Conoco, Inc. (Apr. 29, 1999).
37. Settlement Agreement & Proposed Class 3 Modification to Permit No. HW-50095 Between Texans United Educ. Fund, Manchester Residents & Rhône Poulenc (Nov. 1992).
38. See, e.g.. Memorandum of Understanding Between the Cmty. Groups W. County Toxics Coal., People Do!, Citizens for a Better Env't, & Chevron Richmond Refinery (May 31, 1994).
39. See Sterk, supra note 4, at 1290 ("[H]igh transaction costs [are] typically defined as cases in which multiple parties generate the potential for holdouts and fxeeriders.");
40. cf. Stephen N. Bretsen & Peter J. Hill, Irrigation Institutions in the American West, 25 UCLA J. ENVTL. L. & POL'Y 283, 288-89 (2007) ("Several types of transaction costs influenced the development of the type of organizations used by settlers in the American West[, including]... asset specificity and opportunism, holdout problems, and free-rider problems.").
41. An institutional context includes "all organizations within a society supplying a given type of product or service together with their associated organizational sectors: suppliers, financiers, regulators, and so forth." W. Richard Scott & John W. Meyer, The Organization of Societal Sectors: Propositions and Early Evidence, in THE NEW INSTITUTIONALISM IN ORGANIZATIONAL ANALYSIS 108 (Walter W. Powell & Paul J. DiMaggio eds., 1991).
42. See, e.g., Kaplow & Shavell, supra note 4, at 733-34.
43. Several scholars have begun to correct for individual rationality assumptions in the nuisance literature. Farnsworth, in his classic treatment of post-judgment bargaining among parties to nuisance disputes, focused on the "endowment effect," which is an observed difference between what parties are willing to pay for a good and what they demand for it if it already belongs to them. Farnsworth suggested that "a strong endowment effect attaches to judgments from a court," although he cautioned against using the effect as an explanatory tool without carefully defining the concept. Ward Farnsworth, Do Parties to Nuisance Cases Bargain After Judgment? A Glimpse Inside the Cathedral, 66 U. CHI. L. REV. 373, 381, 394 (1999). More recently, Rachel Godsil explored the endowment effect and other deviations from individual rationality within the context of South Camden Citizens
44. In Action v. New Jersey Department of Environmental Protection, 145 F. Supp. 2d 446 (D.N.J. 2001).
45. Rachel D. Godsil, Viewing the Cathedral from Behind the Color Line: Property Rules, Liability Rules, and Environmental Racism, 53 EMORY L.J. 1807, 1813 (2004). Finally, Parchomovsky and Siegelman showed how "community externalities" such as interpersonal networks can facilitate a neighborhood's ratification of a buy out agreement.
46. Gideon Parchomovsky & Peter Siegelman, Selling Mayberry: Communities and Individuals in Law and Economics, 92 CAL. L. REV. 75, 113-19 (2004);
47. see also Christine Jolis, Cass R. Sunstein & Richard Thaler, A Behavioral Approach to Law and Economics, 50 STAN. L. REV. 1471, 1476-79 (1998) (discussing effects of bounded rationality, bounded willpower, and bounded self-interest);
48. Daphna Lewinsohn-Zamir, The Choice Between Property Rules and Liability Rules Revisited: Critical Observations from Behavioral Studies, 80 TEX. L. REV. 219, 227-31 (2001) (discussing findings in behavioral studies to illustrate divergence between "conventional economic assumptions of human opportunism and greediness and people's 'real-life' behavior").
49. New institutional economics is a revitalization of Coase's work led by Oliver Williamson. Oliver E. Williamson, The New Institutional Economics: Taking Stock, Looking Ahead, 38 J. ECON. LIT. 595, 601-02 (2000);
50. see ORGANIZATION THEORY: FROM CHESTER BARNARD TO THE PRESENT AND BEYOND (Oliver E. Williamson ed., 1995).
51. Driesen & Ghosh, supra note 8, at 106-10 (focusing on transaction cost economics and arguing for an analysis of costs that includes awareness of the need to generate transaction costs to align private incentives with public goods, as in the context of emissions trading);
52. Esty, supra note 2, at 141-42 (extending Williamson's comparison of markets and hierarchy to negotiated exchange of property rights and command-and-control regulation).
53. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601-9675 (2006), and the Superfund Amendments and Reauthorization Act of 1986 (SARA), 42 U.S.C. §§ 11001-11023 (2006), give the Environmental Protection Agency broad authority to respond to and clean up past releases of hazardous substances.
54. Alexander E. Farrell, Overview of the Superfund Program, in RECLAIMING THE LAND: RETHINKING SUPERFUND INSTITUTIONS, METHODS AND PRACTICES 25, 26-28 (Gregg P. Macey & Jonathan Z. Cannon eds., 2007);
55. see George Van Cleve, Would the Superfund Response Cost Allocation Procedures Considered by the 103d Congress Reduce Transaction Costs?, 25 ENVTL. L. REP. 10, 134, 10, 134 (1995).
56. See, e.g., Susan Bruninga, Water Pollution: Draft Policy Statement Being Crafted by EPA on Market-Based Approaches, DAILY ENV'T. REP. (BNA), No. 230, Dec. 3, 2001, at A-2;
57. x-Making Sense of a Flawed System, DAILY ENV'T. REP. (BNA), No. 136, July 14, 2000, at B-1, B-6 to B-7.
58. See infira notes 80-85 and accompanying text.
59. A more comprehensive focus on institutions also provides a bridge for scholars historically concerned with linking economic efficiency and social justice. Edward L. Rubin, The New Legal Process, The Synthesis of Discourse, and the Microanalysis of Institutions, 109 HARV. L. REV. 1393, 1424 (1996) (describing how institutional analysis could provide a methodology unifying fields historically concerned with efficiency, such as economics, and justice, such as political analysis).
60. See generally A.C. PIGOU, THE ECONOMICS OF WELFARE 131-37 (3d ed. 1929).
61. Coase, supra note 10, at 2;
62. see also Donald H. Regan, The Problem of Social Cost Revisited, 15 J.L. & ECON. 427, 436-37 (1972).
63. W. RICHARD SCOTT, INSTITUTIONS AND ORGANIZATIONS 33 (1995) (emphasis omitted).
64. Coase, Institutional Structure, supra note 11, at 714.
65. See, e.g., DANIEL A. FARBER & PHILIP P. FRICKEY, LAW AND PUBLIC CHOICE 3, 20-23 (1991).
66. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 152-54 (1st ed. 1972);
67. R.H. Coase, The Federal Communications Commission, 2 J.L. & ECON. 1, 39-40 (1959).
68. Interview with Margie Richard, President, Concerned Citizens of Norco, in Diamond, La. (Feb. 28, 2001).
69. U.S. GEN. ACCOUNTING OFFICE, HOMELAND SECURITY: FEDERAL ACTION NEEDED TO ADDRESS SECURITY CHALLENGES AT CHEMICAL FACTLITTES 1 (2004) (report and statement of John B. Stephenson, Director of Natural Resources and Environment, submitted to the Subcommittee on National Security, Emerging Threats, and International Relations, of the House of Representatives).
70. See Dara O'Rourke & Gregg P. Macey, Community Environmental Policing: Assessing New Strategies of Public Participation in Environmental Regulation, 22 J. POL'Y ANALYSIS & MGMT. 383, 392 n.12 (2003).
71. CHARLES PERROW, NORMAL ACCIDENTS: LIVING WITH HIGH-RISK TECHNOLOGIES 102 (1999).
72. See CONCERNED CITIZENS OF NORCO, SIERRA CLUB-DELTA CHAPTER, XAVIER UNTV. DEEP SOUTH CTR. FOR ENVTL. JUSTICE, AND EARTHJUSTICE LEGAL DEF. FUND, SHELL-NORCO, TOXIC NEIGHBOR: THE CASE FOR RELOCATION 5 (1999).
73. NEW SARPY CONCERNED CITIZENS & LA. BUCKET BRIGADE, STATE OF THE ART OR FALLING APART? 3 (2000).
74. For example, fugitive emissions from the Shell Chemical plant's East Site in Norco equaled 345,146 pounds in 2008, compared with 464,238 pounds from stack emissions. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ENVTROFACTS MULTISYSTEM REPORT ON SHELL CHEMICAL LP NORCO CHEMICAL PLANT, EAST SITE, http://oaspub.epa.gov/enviro/multisys2.get-list?facility-uin=110013831201 (last visited Jan. 22, 2010).
75. Emergency Planning and Community Right-To-Know Act of 1986, Pub. L. No. 99-499, §§300-330, 100 Stat. 1613, 1728-58 (codified as amended at 42 U.S.C. §§11001-11050 (2006)). EPCRA was enacted after chemical releases involving two Union Carbide plants in 1984 (in Bhopal, India and Institute, West Virginia). In both cases, government officials discovered that the extent of the disaster was heightened by a lack of adequate emergency planning. Following a study commissioned the following year by the Environmental Protection Agency (identifying over 6,900 chemical spill accidents across the country in the previous five years), Congress enacted legislation to improve the public's knowledge of chemicals in their communities and to create plans at each level of government to respond to future accidents.
76. H.R. REP. NO. 99-962 (1986) (Conf. Rep.).
77. See generally Dorceta E. Taylor, The Rise of the Environmental Justice Paradigm: Injustice , Framing and the Social Construction of Environmental Discourses, 43 AM. BEHAV. Sa. 508 (2000) (outlining the rise of the community-based environmental justice movement and its influence on environmental research and policy).
78. O'Rourke & Macey, supra note 39, at 385;
79. see GREGG P. MACEY, SHELTERING IN PLACE: NEGOTIATING WITH IRRATIONAL ORGANIZATIONS 6 (forthcoming 2010) (manuscript on file with author).
80. GREGG P. MACEY & LAWRENCE SUSSKTND, USING DISPUTE RESOLUTION TECHNIQUES TO ADDRESS ENVIRONMENTAL JUSTICE CONCERNS: CASE STUDIES 50 (2003).
81. Section 313 of EPCRA mandates that the EPA give the public access to information collected annually on routine releases of chemicals falling within Standard Industrial Classifications 20-39 and released from facilities that employ ten or more workers and use more than 10,000 pounds of a listed chemical within a calendar year. This information is presented in a searchable index and in map form at http://www.scorecard.org.
82. STEVE LERNER, DIAMOND: A STRUGGLE FOR ENVIRONMENTAL JUSTICE IN LOUISIANA'S CHEMICAL CORRIDOR 245-60 (2005).
83. Settlement Agreement & Release, supra note 18, at 2.
84. Good Neighbor Agreement, supra note 17, at 1-8, 15.
85. MACEY, supra note 47.
86. See generally Parchomovsky & Siegelman, supra note 24 (exploring how a small town avoided collective action and holdout problems when it accepted a buyout offer from a neighboring power company).
87. See infra notes 150-73 and accompanying text.
88. John Commons also wrote in the early 1930s that transactions should be the basic unit of analysis in economics. JOHN R. COMMONS, INSTTTUTIONAL ECONOMICS: ITS PLACE IN POLTTICAL ECONOMY 4-9 (1934).
89. Coase introduced Social Cost as a work "concerned with those actions of business firms which have harmful effects on others," including the "standard example" of "a factory the smoke from which has harmful effects on those occupying neighbouring properties." Coase, supra note 10, at 1.
90. Coase tried, admittedly in vain, to distance himself from the legal academy's focus on hypothetical, zero transaction cost bargaining situations. See R.H. COASE, THE FIRM, THE MARKET, AND THE LAW 15 (1988).
91. Coase, Institutional Structure, supra note 11, at 717.
92. Coase, The Nature of the Firm, supra note 11.
93. Coase, supra note 10, at 17.
94. Id. at 17-18.
95. Coase first defined "transaction costs" in The Nature of the Firm. Coase, The Nature of the Firm, supra note 11, at 390-91. His definition appeared in simplified form in Social Cost: In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on.
96. Coase, supra note 10, at 15. Other definitions abound, focused to varying degrees on identification, information, negotiation, and enforcement costs. See, e.g., ETRTK G. FURUBOTN & RUDOLF RICHTER, INSTITUTIONS AND ECONOMIC THEORY: THE CONTRIBUTION OF THE NEW INSTTTUTIONAL ECONOMICS 40 (1997) (defining transaction costs as the costs of measuring resources or claims, understanding and utilizing rights, and negotiating and enforcing transactions);
97. Guido Calabresi, Transaction Costs, Resource Allocation, and Liability Rules-A Comment, 11 J.L. & ECON. 67, 68 n.5 ("By transaction costs, I have in mind costs like those of getting large numbers of people together to bargain....").
98. POSNER, supra note 5, at 45-47.
99. Calabresi, supra note 63, at 72.
100. RICHARDA. POSNER, THE ECONOMICS OF JUSTICE 70-71 (1981).
101. Wang, supra note 8, at 2060 (arguing that in Boomer v. Atlantic Cement Co., 257 N.E.2d 870 (N.Y. 1970), the court considered "the possibility of time dividing the protection of an entitlement between liability and property rules").
102. See, e.g., Murray B. Rutherford, Jack L. Knetsch & Thomas C. Brown, Assessing Environmental Losses: Judgments of Importance and Damage Schedules, 22 HARV. ENVTL. L. REV. 51, 94 (1998) (analogizing property rules and liability rules to environmental damage assessments);
103. Jonathan Baert Wiener, Global Environmental Regulation: Instrument Choice in Legal Context, 108 YALE L.J. 677, 682, 704-13 (1999) (considering whether property-based rules or liability rules should be used to address global environmental problems);
104. João C J.G. de Medeiros, Note, How the Presumption Against Extraterritoriality Has Created a Gap in Environmental Protection at the 49th Parallel, 92 MTNN. L. REV. 529, 562 nn.230-31 (2007) (outlining the differences in application of the National Environmental Policy Act (described as a rule-based property regulation) and the Comprehensive Environmental Response, Compensation, and Recovery Act (labeled as a liability rule regulation)).
105. Ronald Coase, The New Institutional Economies, 88 AM: ECON. REV. 72, 73 (1998).
106. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM 85-162 (1985).
107. See NETL K. KOMESAR, IMPERFECT ALTERNATIVES: CHOOSING INSTITUTIONS IN LAW, ECONOMICS, AND PUBLIC POLICY 3-13, 53-150 (1994).
108. Pierre Schlag, The Problem of Transaction Costs, 62 S. CAL. L. REV. 1661,1672 (1989).
109. See Coase, Institutional Structure, supra note 11, at 718-19.
110. Williamson also criticized Coase's treatment of the firm as tautological: "[T]ransaction costs are appropriately made the center piece of the analysis, but these are not operationalized in a fashion that permits one to assess the efficacy of completing transactions as between firms and markets in a systematic way." OLIVER E. WILLIAMSON, MARKETS AND HIERARCHIES: ANALYSIS AND ANTITRUST IMPLICATIONS 3 (1975).
111. WILLIAMSON, supra note 70, at 41-42.
112. Oliver E. Williamson, The Economics of Organization: The Transaction Cost Approach, 87 AM. J. Soc. 548, 555-57, 561 (1981).
113. See generally WILLIAMSON, supra note 70, at 85-162.
114. Williamson, supra note 76, at 557.
115. Id. at 552;
116. see also WILLIAMSON, supra note 74, at 8-10 (describing firms and markets as "alternative instruments for completing a related set of transactions" and setting out to determine the factors that contribute to a decision to rely on one or the other governance structure).
117. See, e.g., COASEAN ECONOMICS: LAW AND ECONOMICS AND THE NEW INSTITUTIONAL ECONOMICS (Steven G. Medema ed., 1998);
118. Joseph Blocher, Institutions in the Marketplace of Ideas, 57 DUKE L.J. 821 (2008);
119. Robert P. Merges, Intellectual Property Rights and the New Institutional Economics, 53 VAND. L. REV. 1857 (2000);
120. Todd J. Zywicki, Institutions, Incentives, and Consumer Bankruptcy Reform, 62 WASH. & LEE L. REV. 1071 (2005).
121. Williamson, supra note 76, at 553.
122. See DOUGLASS C. NORTH, INSTITUTIONS, INSTITUTIONAL CHANGE AND ECONOMIC PERFORMANCE 22-23 (1990);
123. HERBERT A. SIMON, ADMINISTRATIVE BEHAVIOR 93-97 (4th ed. 1997);
124. WILLIAMSON, supra note 70, at 133.
125. SIMON, supra note 81, at 88-89;
126. WILLIAMSON, supra note 70, at 30-32.
127. Williamson, supra note 76, at 554.
128. Id.
129. Id.
130. See generally WTLLIAMSON, supra note 70;
131. WILLIAMSON, supra note 74.
132. See WILLIAMSON, supra note 74, at 3, 6.
133. COMMONS, supra note 56, at 6.
134. Douglass C. North, Economic Performance Through Time, 84 AM. ECON. REV. 359, 360 (1994);
135. see NORTH, supra note 81, at 4, 57.
136. For example, a social norm such as "fair dealing" reduces transaction costs by "lessening the need for formal contracting and enforcement mechanisms." Blocher, supra note 79, at 841. Ellickson demonstrated that social norms are easier to enforce than legal sanctions. ROBERT C. ELLICKSON, ORDER WITHOUT LAW 282-83 (1991).
137. North, supra note 89, at 360-61.
138. Coase, Institutional Structure, supra note 11, at 714.
139. See North, supra note 89, at 359-60.
140. Id. at 360.
141. Coase, Institutional Structure, supra note 11, at 714;
142. HANDBOOK OF NEW INSTTTUTIONAL ECONOMICS 4 (Claude Menard & Mary M. Shirley eds., 2005).
143. Coase, Institutional Structure, supra note 11, at 714.
144. Williamson, supra note 25, at 597.
145. -42 U.S.C. §§9601-9675 (2006).
146. Driesen & Ghosh, supra note 8, at 76-79.
147. One widely cited study of nuisance theory noted the conventional understanding of strategic behaviors, from "[holding] out for a disproportionate share of the gains from trade or [freeloading] on the deal made by others" to withholding private information and "[wasting] time and money trying to extract a large share of the gains from trade" in a bilateral monopoly situation. Farnsworth, supra note 24, at 378;
148. see COOTER & ULEN, supra note 8, at 175;
149. A. MITCHELL POLTNSKY, INTRODUCTION TO LAW AND ECONOMICS 18 (1989);
150. POSNER, supra note 5, at 62-63;
151. Ian Ayres & Eric Talley, Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade, 104 YALE L.J. 1027, 1027 (1995);
152. Louis Kaplow & Steven Shavell, Do Liability Rules Facilitate Bargaining? A Reply to Ayres and Talley, 105 YALE L.J. 221, 222 (1995);
153. Kaplow & Shavell, supra note 4, at 767;
154. Polinsky, supra note 15, at 1092;
155. Schlag, supra note 72, at 1673.
156. See Coase, supra note 69, at 72.
157. See supra note 24.
158. These dynamics can be studied in informal organizations as well as public agencies. See, e.g., Gregg P. Macey & Lawrence Susskind, The Secondary Effects of Environmental Justice Litigation: The Case of West Dallas Coalition for Environmental Justice v. EPA, 20 VA. ENVTL. L.J. 431, 438-441 (2001).
159. This Article focuses on the work of a single branch within organization theory, namely what Powell and DiMaggio refer to as "neoinstitutionalism. " See, e.g., SCOTT, supra note 33;
160. Paul J. DiMaggio & Walter W. Powell, Introduction to THE NEW INSTITUTIONALISM IN ORGANIZATIONAL ANALYSIS, supra note 22, at 1, 12;
161. James G. March & Johan P. Olsen, The New Institutionalism: Organizational Factors in Political Life, 78 AM. POL. Sa. REV. 734 (1984);
162. John W. Meyer & Brian Rowan, Institutionalized Organizations: Formal Structure as Myth and Ceremony, 83 AM. J. SOC. 340 (1977);
163. Lynne G. Zucker, The Role of Institutionalization in Cultural Persistence, 42 AM. SOC. REV. 726 (1977).
164. See Simon, supra note 81, at 88-89.
165. See generally RICHARD M. CYERT & JAMES G. MARCH, A BEHAVIORAL THEORY OF THE FIRM (1963);
166. JAMES G. MARCH & JOHAN P. OLSEN, AMBIGUITY AND CHOICE IN ORGANIZATIONS (1976);
167. JAMES G. MARCH & HERBERT A. SIMON, ORGANIZATIONS (1958);
168. Michael D. Cohen, James G. March & Johan P. Olsen, A Garbage Can Model of Organizational Choice, 17 ADMTN. Sct. Q. 1 (1972).
169. Jack Knight, Explaining the Rise of Neoliberalism: The Mechanisms of Institutional Change, in THE RISE OF NEOLIBERALISM AND THE INSTITUTIONAL ANALYSIS 27-50 (John L. Campbell & Ove K. Pederson eds., 2001).
170. Marc Schneiberg, Combining New Institutionalisms: Explaining Institutional Change in American Property Insurance, 20 Soc. F. 93, 99 (2005).
171. Royston Greenwood & C.R. Hinings, Understanding Radical Organizational Change: Bringing Together the Old and the New Institutionalism, 21 ACAD. MGMT. REV. 1022, 1025 (1996).
172. DiMaggio & Powell, supra note 104, at 13.
173. It is important to distinguish organizations from institutions. An organization is a social collective with a "goal of survival and self-perpetuation,... more clearly defined, demarcated, and defended boundaries, and often... [a] formal relationship with the state that recognizes [its] existence as [a] distinct social entit[y]." JEFFREY PFEFFER, NEW DIRECTIONS FOR ORGANIZATION THEORY: PROBLEMS AND PROSPECTS 9 (1997).
174. Institutions operate at a number of levels, including that of organizations, subsystems within organizations, and broader organizational fields. SCOTT, supra note 33, at 55-60.
175. David Dequech, Institutions and Norms in Institutional Economics and Sociology, 40 J. ECON. ISSUES 473, 477 (2006).
176. DiMaggio & Powell, supra note 104, at 15.
177. These and other means of expressing institutionalized expectations, including rules, standard operating procedures, and blueprints for action, were the focus of Meyer and Rowan's groundbreaking work on the subject . See Meyer & Rowan, supra note 104, at 341-343
178. Stephen R. Barley & Pamela S. Tolbert, Institutionalization and Structuration: Studying the Links Between Action and Institution, 18 ORG. STUD. 93, 96 (1997).
179. Id at 94.
180. Paul J. DiMaggio & Walter W. Powell, The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields, 48 AM. SOC. REV. 147, 150-154 (1983).
181. See, e.g., Isin Guler, Mauro F. Guillén & John Muir Macpherson, Global Competition, Institutions, and the Diffusion of Organizational Practices: The International Spread of ISO 9000 Quality Certificates, 47 ADMIN. SVI. Q. 207, 207-208 (2002);
182. Andrew J. Hoffman, Institutional Evolution and Change: Environmentalism and the U.S. Chemical Industry, 42 ACAD. MGMT. J. 351, 352(1999).
183. Meyer & Rowan, supra note 104, at 343;
184. Mark C. Suchman, Managing Legitimacy: Strategic and Institutional Approaches, 20 ACAD. MGMT. REV. 571, 571 (1995);
185. Michael Vandenbergh, The Private Life of Public Law, 105 COLUM. L. REV. 2029, 2074 (2005).
186. See Cohen, March & Olsen, supra note 105, at 1.
187. DiMaggio & Powell, supra note 115, at 150-154
188. See SIMON, supra note 81, at 88.
189. DiMaggio & Powell, supra note 115, at 150-154
190. Greenwood & Hinings, supra note 108, at 1027;
191. Christine Oliver, Strategic Responses to Institutional Processes, 16 ACAD, OF MGMT. REV. 145, 164-167 (1991).
192. Schneiberg, supra note 107, at 120-125
193. Witold J. Henisz & Andrew Delios, Uncertainty, Imitation, and Plant Location: Japanese Multinational Corporations 1990-1996, 46 ADMIN. SCI. Q. 443, 466-69 (2001);
194. Harland Prechel, Irrationality and Contradiction in Organizational Change: Transformation in the Corporate Form of a U.S. Steel Corporation, 32 Soc. Q. 423, 428-440 (1991).
195. Hoffman, supra note 116, at 354-366
196. Onker N. Basu, Mark W. Dirsmith & Parveen P. Gupta, The Coupling of the Symbolic and the Technical in an Institutionalized Context: The Negotiated Order of the GAO's Audit Reporting Process, 64 AM. SOC. REV. 506, 522-523 (1999);
197. Parveen P. Gupta, Mark W. Dirsmith & Timothy J. Fogarty, Coordination and Control in a Government Agency: Contingency and Institutional Theory Perspectives on GAO Audits, 39 ADMTN. Sa. Q. 264, 277-280 (1994).
198. Guler, Guillén & Macpherson, supra note 116, at 211-15, 223-229
199. DiMaggio & Powell, supra note 104, at 15.
200. Meyer & Rowan, supra note 104, at 341.
201. BRUCE A. ACKERMAN & WILLIAM T. HASSLER, CLEAN COAL/DTRTY AIR 23-24, 155, 161 (1981).
202. Meyer & Rowan, supra note 104, at 350.
203. LEE CLARKE, ACCEPTABLE RISK? MAKING DECISIONS IN A TOXIC ENVIRONMENT 30-58 (1989).
204. Letter from Paul L. Schrader, Acting Chief Refinery Engineer, to Hossain Kazemi, Reg'l Water Quality Control Bd., at 2 (Sept. 15, 1994) ("Estimated Quantity of Material Released"); see also infra Part III.
205. Christine Oliver, Strategic Responses to Institutional Processes, 16 ACAD, OF MGMT. REV. 145, 146, 148 (1991).
206. Meyer & Rowan, supra note 104, at 350-51, 358-359
207. See Walter W. Powell, Institutional Effects on Organizational Structure and Performance, in INSTITUTIONAL PATTERNS AND ORGANIZATIONS: CULTURE AND ENVIRONMENT 115, 115-116 (Lynne G. Zucker ed., 1988).
208. Schneiberg, supra note 107, at 103.
209. Id.
210. See Wanda J. Orlikowski, The Duality of Technology: Rethinking the Concept of Technology in Organizations, 3 ORG. SCI. 398, 409 1992).
211. For examples of studies exploring these effects, see Stephen R. Barley, Technology as an Occasion for Structuring: Evidence from Observations of CT Scanners and the Social Order of Radiology Departments, 31 ADMIN. Sa. Q. 78 (1986);
212. Laura J. Black, Paul R. Carlile & Nelson P Repenning, A Dynamic Theory of Expertise and Occupational Boundaries in New Technology Implementation: Building on Barley's Study of CTScanning, 49 ADMTN. SCI. Q. 572 (2004);
213. Wanda J. Orlikowski, Using Technology and Constituting Structures: A Practice Lens for Studying Technology in Organizations, 11 ORG. Sa. 404 (2000);
214. Wanda J. Orlikowski, JoAnne Yates, Kazuo Okamura & Masayo Fujimoto, Shaping Electronic Communication: The Metastructuring of Technology in the Context of Use, 6 ORG. Sa. 423 (1995).
215. Orlikowski, supra note 139, at 411.
216. See id. at 404-405
217. Id. at 406.
218. Barley & Tolbert, supra note 113, at 99-103.
219. Id. at 97.
220. see also ANTHONY GIDDENS, THE CONSTITUTION OF SOCIETY 25-29 (1984) (discussing how social structures and institutions are reproduced over time and analyzed through the prior experiences of social actors).
221. See Barley & Tolbert, supra note 113, at 97-98.
222. Id.
223. GIDDENS, supra note 146, at 28-29.
224. Defined as "observable, recurrent activities and patterns of interaction characteristic of a particular setting," scripts are the means through which individual practices and understandings accumulate and set conditions for future action. Barley & Tolbert, supra note 113, at 98.
225. They have been defined elsewhere as "routines" or "schemata," but in each case the concepts represent similar phenomena. See Martha S. Feldman & Brian T. Pentland, Reconceptualizing Organizational Routines as a Source of Flexibility and Change, 48 ADMIN. SCI. Q. 96, 97-98 (2003);
226. Andrew Hargadon & Angelo Fanelli, Action and Possibility: Reconciling Dual Perspectives of Knowledge in Organizations, 13 ORG. SCI. 290, 293 (2002).
227. Barley, supra note 140, at 83.
228. Id. at 82-84.
229. Scripts are based on the notion that cognition is "embedded," or emerges as individuals interact with their environment. Bart Nooteboom, Elements of a Cognitive Theory of the Firm, 9 ADVANCTS IN AUSTRIAN ECON. 145, 149 (2007).
230. See Paul J. Heald & James E. Heald, Mindlessness and Law, 77 VA. L. REV. 1127, 1143-1151 (1991).
231. Dennis A. Gioia & Peter P. Poole, Scripts in Organizational Behavior, 9 ACAD, OF MGMT. REV. 449, 450 (1984).
232. Blake E. Ashforth & Yitzhak Fried, The Mindlessness of Organizational Behaviors, 41 HUM. REL. 305, 306 (1988).
233. Barley, supra note 140, at 83.
234. Dennis A. Gioia & Charles C. Manz, Linking Cognition and Behavior: A Script Processing Interpretation of Vicarious Learning, 10 ACAD, OF MGMT. REV. 527, 532 (1985).
235. Ashforth & Fried, supra note 155, at 308.
236. Id. at 315.
237. Id. at 316-19;
238. see, e.g., THOMAS D. BEAMISH, SILENT SPILL: THE ORGANIZATION OF AN INDUSTRIAL CRISIS 46-50, 73-77 (2002).
239. Robert G. Lord & Mary C. Kernan, Scripts as Determinants of Purposeful Behavior in Organizations, 12 ACAD, OF MGMT. REV. 265, 274 (1987).
240. Barley, supra note 140, at 85-86;
241. Gioia & Poole, supra note 154, at 456-457
242. Barley, supra note 140, at 84-86.
243. Id. at 91-92.
244. Id. at 81, 84-86;
245. Gioia & Poole, supra note 154, at 456-457
246. Barley, supra note 140, at 82.
247. Id. at 85-86.
248. See MACEY, supra note 47, at ch. 4 (manuscript on file with author).
249. Id.
250. Id.
251. Id.
252. Id.
253. Karan Sonpar, Jay M. Handelman, & Ali Dastmalchian, Implementing New Institutional Logics in Pioneering Organizations: The Burden of Justifying Ethical Appropriateness and Trustworthiness, 90 J. OF Bus. ETHICS 345, 348 (2009).
254. Barley & Tolbert, supra note 113, at 100-103
255. Id.
256. Id. at 100-103 & fig.2.
257. Memorandum from the Dir. of Enforcement, Bay Area Air Quality Mgmt Dist., Unocal Refinery, to the Air Pollution Control Officer (Sept. 23, 1994) (on file with author).
258. See Unocal Corp. San Francisco Refinery, Catacarb Release Fact Sheet (no date);
259. see also MACEY, supra note 47, at ch. 4 (manuscript on file with author).
260. Post Incident Analysis, L. Miller, Fire Protection Department (Aug. 31, 1994).
261. Id.
262. See Unocal Corp. San Francisco Refinery, supra note 178; Letter from Paul L. Schrader, Acting Chief Refinery Engineer, to Dir. of Enforcement, Bay Area Air Quality Mgmt. Dist. (Sept. 22, 1994) ("On August 22, 1994, while under normal operating conditions, the D-409 Regenerator Tower developed a leak to the atmosphere in the upper section of the tower....Some time after September 2, 1994, conditions in the tower changed....").
263. Montgomery Watson, Sampling and Analysis Plan for the September 1994 Catacarb Release, Unocal San Francisco Refinery, at 1 (Sept. 1994) ("On Tuesday, September 6, 1994, Unocal personnel at the Unocal San Francisco Refinery (SFR), located in the city of Rodeo, California, determined that a solution with the trade name of Catacarb was being released in the form of a mist from the D-409.... The plant was shut down and regulatory agencies were contacted....").
264. PERROW, supra note 40, at 67.
265. Transcripts of twenty-one depositions of refinery workers were coded for worker activities, decisions, and actions during the two-week accident Their
266. Transcript of Deposition of Ellen Barker, Hydrotreating Engineer, Unocal San Francisco Refinery, at 343, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Ct. June 24, 1996).
267. Id. at 344.
268. Id. at 348-61;
269. see id at 378-79; Transcript of Deposition of Lanny Partain, Shift Supervisor, Unocal San Francisco Refinery, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Ct May 23, 1996);
270. UNOCAL PETROLEUM PRODUCTS AND CHEMICALS DIVISION, SAN FRANCISCO REFINERY, PROCESS HAZARD .NALYSIS: UNICRACKING UNIT 240, HYDROGEN PRODUCTION SECTION-PLANT 4 (Feb. 1994);
271. UNOCAL SAN FRANCISCO REFINERY, SAN FRANCISCO REFINERY POLICIES AND PROCEDURES MANUAL: MOC AND PRE-STARTUP SAFETY REVIEW PROCEDURES (1994) (originally issued in 1992).
272. Transcript of Deposition of Russell Crawford, Superintendent of Hydrotreating, Unocal San Francisco Refinery, at 77-78, 310-11, 327-30, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Q. June 19, 1996); see Letter from Randall L. Sawyer, Risk Mgmt and Prevention Program Specialist, Contra Costa County Health Servs. Dep't, to Warren A. Smith, Superintendent Envtl. Affairs, S.F. Refinery (Oct 25, 1994) (expressing concerns over the failure to invoke a Management of Change procedure);
273. Transcript of Deposition of Stephen Plesh, supra note 184, at 263.
274. Transcript of Deposition of Ellen Barker, supra note 185, at 392-93;
275. see also id. at 377-78 (stating that recollection of Process Review was that it was "an endorsement of continued operation"). 190. Transcript of Deposition of Adrien Van de Hoef, Bulk Shift Supervisor, Unocal San Francisco Refinery, at 20, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Q. July 17, 1996).
276. Leak Observation Log, Hydrotreating Department (8/24/94-9/6/94) (Sept. 6, 1994) (emphasis added).
277. 2 removal, in the tower. Transcript of
278. 2 removal, in the tower. Transcript of Deposition of Gary Martin, Plant 4 Operator, Unocal San Francisco Refinery, at 124-32, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Ct. Apr. 16, 1996). The period between September 1 and 2 when operators did not observe Catacarb in the plume coming out of the tower corresponds with an unplanned shutdown elsewhere in the refinery that caused stripping steam rates to plummet. Transcript of Deposition of Gary Martin, supra, at 82-83; Transcript of Deposition of Hamid Raza Arabzadeh, Industrial Hygiene Manager, Unocal San Francisco Refinery, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Ct. Aug. 14, 1996); see also infra tbl 2. Transcript of Deposition of Diane Wang, Senior Operator, Unocal San Francisco Refinery, at 96-99, In re Unocal Refinery Litigation, No. 94-04141 (Cal. Super. Ct. Aug. 14, 1996).
279. 2 removal."). But because the readings in the log, when they were available for trend analysis, did not necessarily point to Catacarb loss, the clearer objective to avoid catastrophic change prevailed. Transcript of Deposition of Gary Martin, supra note 192; Transcript of Deposition of Hamid Raza Arabzadeh, supra note 192; see also Transcript of Deposition of Diane Wang, supra note 192, at 171-73;
280. 2 slip and a visual description of the leak itself. We have made the decision to run in this condition based on the last ME&I inspection, the knowledge that if the leak gets worse, it will not just crack in half....").
281. For a complete overview of the Catacarb accident see MACEY, supra note 47, at ch. 4 (manuscript on file with author).
282. See supra notes 177-94 and accompanying text.
283. For example. Discharge Monitoring Reports that provide quantity and concentration figures for parameters (substances) used each month at Rhône Poulenc (now Rhodia) showed only a narrow range of lost products that if captured, could be reprocessed and sold to various industries and suggested that little could be done to change the facility's raw material feeds, which fluctuated according to the needs of customers (refineries, carpet producers, and electroplaters). Interview with Environmental Professionals, Rhodia, in Manchester, Tex. (Apr. 23, 2002).
284. For example, emissions problems at the Conoco refinery led EPA Region VIII to overfile on Colorado Department of Public Health and Environment (CDPHE) enforcement actions, claiming that the state did not adequately interpret regulations concerning inspections, record keeping, hazardous waste discharges, notices to the state, and penalties for RCRA violations. Complaint Compliance Order and Notice of Opportunity for Hearing, In re Conoco, Inc., No. RCRA (3008) VIII-97-03 (Mar. 18, 1997). At the same time, the state filed Compliance Advisories under RCRA and the Colorado Hazardous Waste Act regarding benzene in one of Conoco's wells and groundwater contamination. Compliance Order on Consent, In re Conoco, Inc., No. VIII-98-03 (Aug. 7, 1998). A public interest firm filed a citizen suit under section 304 of the Clean Air Act focusing on inadequate emissions monitoring. Complaint CoPIRG Citizen Lobby v. Conoco, Inc., No. 98-30 (N.D. Colo. Jan. 8, 1998). And Conoco adapted to a series of regulatory changes: for example, it sought to improve its control over fugitive emissions and on-site continuous monitoring, two areas of concern addressed in subsequent consent orders with the Department of Justice. Telephone Interview with Air Program Leader, Conoco Refinery (Mar. 22, 2001); Interview with Environmental Director, Conoco Refinery, in Commerce City, Colo. (Mar. 7, 2001).
285. Technology, such as the pollution monitoring system adopted as part of the Unocal agreement introduces its own set of expected behaviors and limitations of operation. See infra notes 220-25 and accompanying text. Organization theorists have long posited that a new technology influences the practices that are demanded by its use, which stabilize over time as new roles and responsibilities called for by the technology become apparent. Trevor J. Pinch & Wiebe E. Bijker, The Social Construction of Facts and Artefacts: Or How the Sociology of Science and the Sociology of Technology Might Benefit Each Other, 14 Soc. STUD. Sa. 399, 410-19 (1984). As a new technology is adopted, the distance between the intentions of a technology's designers and the practices of its users grows as social networks incompatible with the new technology are not disentangled by those who introduce the new artifact. Id.
286. Consent Decree and Final Judgment Bay Area Air Quality Mgmt. Dist. v. Union Oil Co. of CaI., No. C95-03165 (Cal. Super. Ct July 19, 1995).
287. Id.
288. See MACEY supra note 47.
289. Consent Decree & Final Judgment supra note 199.
290. G.R. Hadder, Future Refining Impacts of the Clean Air Act Amendments of 1990, 17 ENERGY 857, 857 (1992);
291. R.C. Sherr, G.A. Smalley & M.E. Norman, Clean Air Amendments Put Big Burden on Refinery Planners, 23 OIL & GAS J. 35, 35-38 (1991).
292. CONTRA COSTA COUNTY, DRAFT ENVIRONMENTAL IMPACT REPORT FOR THE UNOCAL CORPORATION REFORMULATED GASOLINE PROJECT (LAND USE PERMIT 2038-93; STATE CLEARINGHOUSE # 93121027) (1994);
293. see also Statement of Findings and Overriding Considerations for the Union Oil Company of California Reformulated Gasoline Project Land Use Permit Application #2038-93, Adopted by Contra Costa County Board of Supervisors, at 3.
294. Contra Costa County Planning Commission, Community Development Agenda Item #6, Unocal Corporation (Applicant and Owner) (Nov. 15, 1994).
295. See supra note 21.
296. Reports from Committees in Negotiation Packet Crockett-Rodeo Coalition (Nov. 13, 1994).
297. Emergency Response & Community Warning Issues for Negotiation, Crockett-Rodeo Coalition Emergency Response & Community Warning Committee (Nov. 13, 1994).
298. Good Neighbor Agreement supra note 17, at 9; see also infra notes 223-28 and accompanying text.
299. Good Neighbor Agreement supra note 17, at 3.
300. See supra notes 179-94 and accompanying text.
301. See supra notes 177-83 and accompanying text.
302. Telephone Interview with Air Program Leader, supra note 197; Interview with Environmental Director, supra note 197.
303. One facility official noted that "environmental regulations apply to specific pieces of equipment so if your piece of equipment is covered by a specific regulation that requires a certain kind of monitoring that's what you do." Interview with Environmental Director, supra note 197 (comparing operations that require a continuous monitor to those for which the refinery uses input-output factors to estimate emissions); see also Telephone Interview with Air Program Leader, supra note 197
304. See Consent Order, In re Conoco, Inc., No. RCRA (3008) VIII-97-03 (Aug. 11, 1998);
305. Compliance Order on Consent In re Conoco, Inc., No. RCRA (3008) VIII.-98-03, at 13 (Aug. 7, 1998);
306. Settlement Agreement and Release between COPIRG Citizen Lobby, Michael Maes, Lorraine Granado, and Conoco, Inc. (Apr. 29, 1999).
307. Minutes to Telephone Meeting with Randy Weiner, Michael Mae, and Lorraine Granado (Apr. 7, 1998).
308. Memorandum of Understanding Between Crockett-Rodeo Coalition, Shoreline Environmental Alliance, Communities for a Better Environment & Union Oil Company of California dba Unocal (Nov. 3, 1996);
309. SHORELINE ENVTL. ALLIANCE, CMTYS. FOR A BETTER ENV'T, CONTRA COSTA COUNTY HEALTH SERVS., AND U.S. EPA REGION IX, OPTICAL OPEN PATH MONITORS AT THE Tosco SAN FRANCISCO REFINERY AT RODEO FENCELTNE 1 (May 2001).
310. CMTYS. FOR A BETTER ENV'T, REFINERY FENCELTNE MONITORING USING LIGHT BEAMS TO DETECT CHEMICALS AT THE FENCELTNE OF THE TOSCO, RODEO REFINERY (no date); SHORELINE ENVTL. ALLIANCE ET AL., supra note 223, at 7-8.
311. CMTYS. FOR A BETTER ENV'T, supra note 224; see also SHORELINE ENVTL. ALLIANCE ET AL., supra note 223, at 1, 5-6, 7-8, 15; Good Neighbor Agreement, supra note 17, at 9-10; Unocal San Francisco Refinery, Draft Monitoring Plan for the Unocal Perimeter Monitoring Evaluation Test Program, ENSR Consulting and Engineering, at 1-2, 2-1, 3-1, 4-1 to 4-4 (Jan. 1995); Telephone Interview with Crockett Resident (Oct. 31, 2002); Telephone Interview with Facilitator of Unocal Good Neighbor Agreement (Aug. 29, 2002); Telephone Interview with Member of Shoreline Envtl. Alliance (May 31, 2002).
312. Letter to Debbie Sanderson, Contra Costa County Cmty. Dev. Dep't from Fenceline Monitoring Comm. (Apr. 12, 1999);
313. Telephone Interview with Crockett Resident supra note 225;
314. Telephone Interview with Member of Shoreline Envtl. Alliance (May 31, 2002);
315. Letter from Kent G. Peterson, Chair, Planning Advisory Comm., Crockett Improvement Ass'n, to Richard A. Belcher, RFG Project Manager, 76 Products Company, at 2 (Jan. 29, 1996);
316. Telephone Interview with Member of Shoreline Envtl. Alliance (May 28, 2002).
317. See generally SHORELINE ENVIL. ALLIANCE ET AL., supra note 223.
318. Id. apps. G, H; see also Contra Costa County Hazardous Materials Commission, Draft Minutes (Apr. 24, 1997); Telephone Interview with Crockett Resident supra note 225.
319. See, e.g., THOMAS W. MERRILL & HENRY E. SMITH, PROPERTY: PRINCIPLES AND POLICIES 38-40 (2007).
320. Boomer v. Atl. Cement Co., 257 N.E.2d 870 (N.Y. 1970).
321. Henry E. Smith, Exclusion and Property Rules in the Law of Nuisance, 90 VA. L. REV. 965, 1038 (2004)
322. Hendricks v. Stalnaker, 380 S.E.2d 198 (W. Va. 1989).
323. Id. at 199-200.
324. Id. at 200.
325. Id. at 202-03.
326. See Robert Cooter, The Cost of Coase, 11 J. LEGAL STUD. 1, 17-24 (1982).
327. Jennifer Howard-Grenville, The Persistence of Flexible Organizational Routines: The Role of Agency and Organizational Context, 16 ORG. SCI. 618, 631 (2005).
328. See id. at 630.
329. Id.
330. Scott & Meyer, supra note 22.
331. See supra notes 219-22 and accompanying text.
332. Howard-Grenville, supra note 237, at 634.
333. Geraldine DeSanctis & Marshall Scott Poole, Capturing the Complexity in Advanced Technology Use: Adaptive Structuration Theory, 5 ORG. SCI. 121, 125-26 (1994).
334. Howard-Grenville, supra note 237, at 634.
335. Id.
336. Id. at 630.
337. Id. at 634.
338. Smith, supra note 231.
339. Bell & Parchomovsky, supra note 4, at 590.
340. Sterk, supra note 4, at 1290-91.
341. Ayres & Talley, supra note 100, at 1030-31.
342. Krier & Schwab, supra note 14, at 460-64.
343. Spur Indus. v. Del E. Webb Dev. Co., 494 P.2d 700 (Ariz. 1972).
344. Krier & Schwab, supra note 14, at 470-71.
345. Kaplow & Shavell, supra note 4, at 725.
346. Thomas W. Merrill & Henry E. Smith, The Property/Contract Interface, 101 COLUM. L. REV. 773, 793-96 (2001).
347. See supra notes 60-68 and accompanying text.
348. For an overview of the range of environmental regulatory options, see Bradley C. Karkkainen, Bottlenecks and Baselines: Tackling Information Deficits in Environmental Regulation, 86 TEX. L. REV. 1409, 1414-20 (2008).
349. But see Wendy E. Wagner, The Triumph of Technology-Based Standards, 2000 U. ILL. L. REV. 83, 98-100, 101, 106, 108 (reminding us of the virtues of technology-based regulation in encouraging meaningful pollution control when compared to incentive-based approaches).
350. For a number of principled criticisms of command-and-control regulation, see Richard B. Stewart, A New Generation of Environmental Regulation?, 29 CAP. U. L. REV. 21, 27-36 (2001).
351. See, e.g., Clean Air Act §111(h), 42 U.S.C. §7411 (2006); Clean Water Act §301(b)(2)(A), 33 U.S.C. §1314 (2006). For a critique of EPA's "best available technology" strategy, see Bruce A. Ackerman & Richard B. Stewart, Reforming Environmental Law, 37 STAN. L. REV. 1333, 1335-37 (1985).
352. Calabresi & Melamed, supra note 1, at 1096-97.
353. Id. at 730-32. But see Michael P. Vandenbergh, Jack Barkenbus & Jonathan Gilligan, Individual Carbon Emissions: The Low-Hanging Fruit, 55 UCLA L. REV. 1701, 1755-56 (2008) (discussing how transaction costs can serve as a hindrance to the effectiveness of a carbon tax).
354. Wiener, supra note 68, at 733.
355. 2 Emissions Trading Directive and the Climate Stewardship Act, 45 NAT. RESOURCES J. 865, 882-85 (2005).
356. Robert W Hahn & Robert N. Stavins, Incentive-Based Environmental Regulation: A New Era from an Old Idea?, 18 ECOLOGY L.Q. 1, 12-15 (1991);
357. Jon D. Hanson & Kyle D. Logue, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation, 107 YATE L.J. 1163, 1174 (1998).
358. Wiener, supra note 68, at 682, 733-34.
359. See Driesen & Ghosh, supra note 8, at 80; Esty, supra note 2, at 145.
360. See Driesen & Ghosh, supra note 8, at 80; Esty, supra note 2, at 145.
361. See Cass R. Sunstein, Social Norms and Social Roles, 96 COLUM. L. REV. 903, 909 (1996) (describing the importance of understanding social norms in crafting regulatory frameworks).
362. See supra note 4.
363. Public transaction costs include the costs of administering various regulatory programs and can be compared with the costs of private ordering, such as bargaining among private parties. Driesen & Ghosh, supra note 8, at 76, 80-82 (showing.how comparisons of public to private transaction costs can implicate whether a liability or property rule is more appropriate under given circumstances); Eugene Kontorovich, Liability Rules for Constitutional Rights: The Case of Mass Detentions, 56 STAN. L. REV. 755, 766-67 (2004) (same).
364. -42 U.S.C.§7651.
365. Thomas D. Peterson, Robert B. McKinstry, Jr. & John C. Dernbach, Developing a Comprehensive Approach to Climate Change Policy in the United States that Fully Integrates Levels of Government and Economic Sectors, 26 VA. ENVTL. L.J. 227, 247-49 (2008).
366. Barry D. Solomon, New Directions in Emissions Trading: The Potential Contribution of New Institutional Economics, 30 ECOLOGICAL ECON. 371, 375 (1999).
367. Elizabeth Glass Geltman & Andrew E. Skroback, Reinventing the EPA To Conform with the New American Environmentality, 23 COLUM. J. ENVTL. L. 1, 32-33 (1998).
368. Daniel H. Cole & Peter Z. Grossman, When is Command-and-Control Efficient?: Institutions, Technology, and the Comparative Efficiency of Alternative Regulatory Regimes for Environmental Protection, 1999 Wise. L. REV. 887, 889-92.
369. See, e.g., Karl S. Bourdeau & Steven M. Jawetz, 25 Years of Superfund Liability, DAILY ENV'T REP. (BNA), No. 9, Jan. 13, 2006, at B-1, B-7 to B-9 (explaining EPA-issued model administrative orders and consent decrees to encourage settlement).
370. See, e.g., Driesen & Ghosh, supra note 8, at 95.
371. Henry N. Butler & Jonathan R. Macey, Externalities and the Matching Principle: The Case for Reallocating Environmental Regulatory Authority, 14 YALE L. & POL'Y REV. 23, 25 (1996);
372. see also Jonathan H. Adler, Jurisdictional Mismatch in Environmental Federalism, 14 N.YU. ENVTL. L.J. 130, 157 (2005) (discussing the potential inefficiencies and harms from the matching principle in environmental law).
373. See Scott & Meyer, supra note 22 (defining institutional context). For a general discussion of how the boundaries of an environmental problem are a function of geography and time, see de Medeiros, supra note 68, at 561-62.
374. Pamela Najor, EPA Needs To Prod Compliance Efforts by Oil Refineries, Inspector General Says, 35 ENV'T REP. (BNA) 1409, 1409 (2004).
375. Id (stating that by 2004, refineries agreed to $25 million worth of supplemental environmental projects); Patrice Ware, EPA Says It Will Concentrate on Cases that Provide Best Results for Environment, 38 ENV'T REP. (BNA), NO. 3, Jan. 9, 2007, at S-34 (noting 80% of refining industry's capacity is covered under consent decree).
376. See, e.g., United States v. Calcasieu Refining Co., No. 2:08-cv-1215 (W.D. La. Aug. 19, 2008), available at
377. Jody Freeman & Daniel A. Farber, Modular Environmental Regulation, 54 DUKE L.J. 795, 800 (2005).
378. Daniel A. Farber, Taking Slippage Seriously: Noncompliance and Creative Compliance in Environmental Law, 23 HARV. ENVTL. L. REV. 297, 301-11 (1999).
379. Id at 309-11.
380. Cary Coglianese & David Lazer, Management-Based Regulation: Prescribing Private Management to Achieve Public Goals, 37 LAW & SOC'Y. REV. 691, 696-700 (2003) (describing the use of managerial regulation in the areas of food safety, chemical accident avoidance, and pollution prevention).
381. See, e.g., supra notes 191-92 and accompanying text
382. Cary Coglianese, The Managerial Turn in Environmental Policy, 17 N.YU. ENVTL. L.J. 54, 55 (2008).
383. Id. at 56.
384. See generally Karl E. Weick & Karlene H. Roberts, Collective Mind in Organizations: Heedful Interrelating on Flight Decks, 38 ADMIN SCI. Q. 357 (1993).
385. Practical drift, the "slow, steady uncoupling of local practice from written procedure" across multiple levels of organization, suggests that calibrating an optimal array of scripts a priori would prove difficult at best. SCOTT A. SNOOK, FRIENDLY FIRE: THE ACCIDENTAL SHOOTDOWN OF U.S. BLACK HAWKS OVER NORTHERN IRAQ 179-201, 220 (2000) (demonstrating how practical drift while operating in a no fly zone in Iraq resulted in the destruction of two Black Hawk helicopters by F-15C fighter aircraft).
386. DIANE VAUGHAN, THE CHALLENGER LAUNCH DECISION: RISKY TECHNOLOGY, CULTURE, AND DEVIANCE AT NASA 415-22 (1996).
387. Id.
388. Coglianese, supra note 298, at 57-58.
389. Id. at 59.
390. Id at 59-60.
391. EMSs are encouraged by government- or industry group-sponsored programs (such as the National Environmental Performance Track or Responsible Care, respectively) or emerge as individual company efforts to commit to performance goals. Kurt A. Strasser, Do Voluntary Corporate Efforts Improve Environmental Performance?: The Empirical Literature, 35 B.C. ENVTL. AFF. L. REV. 533, 534-36 (2008).
392. Coglianese & Lazer, supra note 296, at 694.
393. Id at 713.
394. Coglianese, supra note 298, at 694.
395. Coglianese, supra note 298, at 65-68; Jennifer A. Howard-Grenville et al.. Constructing the License to Operate: Internal Factors and their Influence on Corporate Environmental Decisions 4-16 (Corporate Social Responsibility Initiative, Working Paper No. 27, 2007; Strasser, supra note 307, at 537-542).
396. Neil Gunningham & Darren Sinclair, Organizational Trust and the Limits of ManagementBased Regulation, 43 LAW & SOC'Y REV. 865, 868 (2009).
397. Allison F. Gardner, Beyond Compliance: Regulatory Incentives to Implement Environmental Management Systems, 11 N.YU. ENVTL. L.J. 662, 674-98 (2003).
398. Kathleen E. Voges et al., The Role of Organizational Template in Radical Change, 14 J. APPLIED MGMT. & ENTREPRENEURSHIP 27 (2009).
399. Krier & Schwab, supra note 14, at 470-71.
400. See supra note 274.
401. Energy Policy Act of 2005, Pub. L. No. 109-58, §311(c), 119 Stat. 594, 685-87.
402. See William W Buzbee, Asymmetrical Regulation: Risk Preemption, and the Floor/Ceiling Distinction, 82 N.Y.U. L. REV. 1547, 1553-56 (2007) (analyzing how federal preemption can displace state and local legal development and the benefits of intersystemic interaction).
403. Id. at 1571-72, 1576.
404. See Robert N. Stavins, Transaction Costs and Tradeable Permits, 29 J. ENVTL. ECON. & MGMT. 133, 134-135 (1995) (explaining how search and information costs may be the most onerous form of transaction costs and how brokers can play a role in reducing those costs).
405. Jodi L. Short & Michael W. Toffel, Coerced Confessions: Self-Policing in the Shadow of the Regulator, 24 J.L. ECON. & ORG. 45, 49-50 (2008);
406. Andrew Childers, Enforcement: EPA Moves Forward with Audit Policy for Violations at Newly Acquired Facilities, DAILY ENV'T REP. (BNA), NO. 148. Aug. 1, 2008, at A-6 to A-7.
407. Eric W. Orts, Reflexive Environmental Law, 89 Nw. U. L. REV. 1227, 1287-1311 (1995).
408. Id. at 1300 (citing Council Regulation 1836/1893, art. 2(e), 1993 O.J. (L 168) 2).
409. Karkkainen, supra note 267.
410. But see William F. Pedersen, Regulation and Information Disclosure: Parallel Universes and Beyond, 25 HARV. ENVTL. L. REV. 151, 165-177 (2001) (highlighting the informational shortfalls of the TRI).
411. See generally Archon Fung & Dara O'Rourke, Reinventing Environmental Regulation from the Grassroots Up: Explaining and Expanding the Success of the Toxics Release Inventory, 25 ENVTL. MGMT. 115, 116, 118-119 (2000).
412. Lynn E. Biais & Wendy E. Wagner, Emerging Science, Adaptive Regulation, and the Problem of Rulemaking Ruts, 86 TEX. L. REV. 1701, 1720-1722 (2008).
413. Calabresi & Melamed, supra note 1.
414. The Unocal refinery in Rodeo is now owned by ConocoPhillips. Accidents and shelter-in-place notices continue. See, e.g.. Accident Information- Conoco Phillips Rodeo Refinery, May 1, 2006- Contra Costa Health Services, http://www.cchealth.org/groups/hazmat/release-conoco-may-2006.php (detailing a shelter-in-place order given after a power failure caused the refinery to flare combustible materials).
415. See MACEY, supra note 47.