Almost every regulatory policy is created to achieve some desirable

Almost every regulatory policy is created to achieve some desirable social goal. When more than 10,000 people are killed annually in industrial accidents, who would disagree with the goal of a safer workplace? Who would dissent from greater highway safety, when more than 50,000 perish each year in automobile accidents? Who would disagree with policies to promote equality in hiring, when the history of opportunities for women and minorities is one of discrimination? Who would disagree with policies to reduce industrial pollution, when pollution threatens health and lives? However, there may be more than one way to achieve these—and many other—desirable social goals.

Charles L. Schultze, chair of former President Carter’s Council of Economic Advisors, is a critic of the current state of federal regulation. Schultze reviewed the regulatory activities of the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA). Neither agency’s policies, he concluded, had worked very well. He described the existing system as a command and control policy. The government tells businesses how to reach certain goals, checks that these commands are followed, and punishes offenders.

Schultze advocates an incentive system. He argues that instead of telling construction businesses how their ladders must be constructed, measuring the ladders, and charging a small fine for violators, it would be more efficient and effective to levy a high tax on firms with excessive worker injuries. Instead of trying to develop standards for 62,000 pollution sources, as the EPA now does, it would be easier and more effective to levy a high tax on those who cause pollution. The government could even provide incentives in the form of rewards for such socially valuable behaviour as developing technology to reduce pollution. Incentives, Schultze argues, use market-like strategies to regulate the industry. They are, he claims, more effective and efficient than command-and-control regulation.

Not everyone is as keen on the use of incentives as Schultze. Defenders of the command-and-control system of regulation compare the present system to preventive medicine—it is designed to minimise pollution or workplace accidents before they become too severe. Defenders of the system argue, too, that penalties for excessive pollution or excessive workplace accidents would be imposed only after substantial damage had been done. They also add that if taxes on pollution or unsafe work environments were merely externalised (that is, passed along to the consumer as higher prices), they would not be much of a deterrent. Moreover, it would take a large bureaucracy to monitor carefully the level of pollution discharged, and it would require a complex calculation to determine the level of tax necessary to encourage businesses not to pollute.

1. What is the central idea of the passage?

(A) Regulatory activities of government exist at different levels.
(B) The pros and cons of using the incentive system were proposed by Schultze.
(C) The old policies framed for workplaces could not be successful for several reasons.
(D) An overview of the regulatory policies for achieving social goals and how the incentive system can be helpful.
(E) How different regulatory policies that encourage specific social behaviours in different set-ups have failed miserably.


2. In Charles Schultze’s argument, the claim is that:

(A) the use of the incentive policy is limited to just a few situations.
(B) the EPA and OSHA should not tell businesses how to regulate themselves.
(C) regulatory policies should be created to achieve certain desirable social goals.
(D) the government should minimise pollution and workplace accidents before they become too severe.
(E) an incentive system would be more effective and efficient than the command-and-control regulation.


3. According to the author, what can be concluded from the passage?

(A) Goals leading to safer workplaces were not achieved.
(B) If incentives are provided, social goals can be achieved.
(C) Socially desirable behaviours need to be achieved to fulfil social goals.
(D) There are several ways in which socially desirable goals can be achieved.
(E) Schultze’s incentive system has received acceptance as well as criticism from people.


4. According to the passage, the author most likely agrees with all of the following statements EXCEPT:

(A) Incentives, in the form of rewards, could be given for socially valuable behaviours.
(B) An incentive system would reward businesses that develop technology to reduce pollution.
(C) An incentive system would involve developing standards for thousands of pollution sources.
(D) Regulatory policies have been created to address workplace and highway safety, discrimination and pollution.
(E) The command-and-control system punishes businesses that do not reach certain goals set by the government.