Often times, when it comes to environmental protection or any other issue of social interest, government intervention is justified on the basis that markets are dominated by businesses and wealthy individuals that are motivated by profit and greed. As a result, their incentives are perverse, and their actions will not be in the best interest to society. Laws and regulations must therefore be implemented to curb their behavior, and achieve a responsible outcome.
The problem with this logic is that for probably close to 30 years now the area of economics known as Public Choice has demonstrated that government decisions can be viewed as rational choices made by individuals to maximize their well being. They may not focus on profits or share prices, but people in government do focus on budget maximization, personal benefits, and power. As the power of the federal government has expanded, the role of big business in influencing government through these channels has been magnified. ( this is referred to as ‘rent seeking’ )
Public Choice Theory allows us to be more precise in evaluating public policy alternatives by looking at the incentives of government and big business and the institutions that influence their behavior.