3. Suppose that the standard industry process for transforming wood chips into pulp for paper manufacturing leads to “badstuff” being flushed into adjacent bodies of water. Badstuff is estimated to create health- and food-related external costs of nearly $1 billion per year and is widely known to elevate cancer risks and birth defects in many localized “hot spots” around the country. Several firms have patented a new process for making pulp that eliminates badstuff pollution. While this patented new process is more expensive than the current industry standard process, it is much, much cheaper than other existing methods of badstuff-free pulp processing. These firms would like to make money from the patent by leasing the technology to other pulp makers and so have an incentive to lobby for more stringent environmental regulations in order to create a market for their new tech nology. Because the benefits of cleaning up badstuff are large and concentrated on people who live in the hot-spot areas, pressure groups have developed around environmental groups, physicians’ groups, sport fishers, surfers, rafters, and concerned parents of small children. The firms that have developed a badstuff-free pulp-processing technology also have a concentrated benefit in more stringent regulation and have begun a high-profile lobbying and public information campaign in partnership with the other pressure groups.

a. How might this scenario be different from that described in problem (1)
above? Using Oye and Maxwell’s terminology, what aspects of this scenario is more Stiglerian than that in problem (1)? Carefully explain your reasoning.

b. Describe how the most likely political economic outcome of proposed badstuff-control regulation might differ from that of gunk-control regulation in problem (1) above. Carefully explain your reasoning.