2. NEGATIVE EXTERNALITIES---it’s uncoordinated, causes overlapping jurisdiction, AND spikes administrative costs.

The foregoing summary of the standard Law and Economics deterrence/cost-internalization framework will be familiar to most readers.6 What may be surprising, however, is the relative lack of scholarly attention devoted to figuring out how these various alternative, often overlapping, and potentially conflicting systems of regulation are, or should be, coordinated with each other. After all, if an external harm is being internalized or deterred by one regulatory tool, it need not, and often should not, be internalized or deterred again by another regulatory tool.

Take the quintessential example of a negative externality-some activity that spews C02 into the atmosphere thereby contributing to the global problem of climate change. If a fully cost-internalizing Pigovian tax (say, a carbon-based tax of the sort that many commentators have recently proposed) were imposed on domestic companies by the U.S. government, there obviously need not (and, from an efficiency perspective, should not) be a state-level carbon-based tax on the same polluters for the same carbon emissions. Nor should there be any overlapping command-and-control regulations or any other sort of regulation (including tort liability) designed to regulate the same conduct. It-the external harm caused by C02 emission-has, by assumption, already been fully regulated. Redundant regulation represents unnecessary administrative costs and potentially excessive deterrence. The same analysis can be applied to torts. Consider automobile accidents or product-related injuries or medical malpractice harms. All are potentially affected, at least in theory, by the same problem of overlapping, uncoordinated, and thus possibly redundant sanctions; this means either over-deterrence or duplicative and therefore excessive administrative costs, or both. Again, the literature has largely neglected this subject.7

In theory, the problem of redundant regulation is just as damaging to the goal of efficiency and social welfare maximization (or cost minimization) as are the negative externalities that these regulatory tools are designed to counteract. This is why it is just as important that a carbon-based tax not be set too high as that it not be set too low-or not enacted at all. How do we avoid the problem of redundant regulation? Ideally, there would be some central, intra-jurisdictional policy planner who would harmonize the various systems of deterrence, choosing the particular system or combination of systems that is most efficient for the purposes at hand. And this sort of centralized harmonization sometimes happens. For example, when Congress enacts a given regulatory regime it sometimes makes explicit the extent to which overlapping state law regulations (including common law tort claims) are to be displaced or, to use a narrower and more specialized term, preempted. Unfortunately, as recent Supreme Court preemption decisions make clear, Congress often fails (or declines) to be explicit about this displacement or preemption question; this leaves courts hearing tort cases to determine when common tort actions have been impliedly preempted and when not.8 Similarly, when the alternative non-tort system of regulation is not a federal regulatory law but something else (state regulatory law or even social norms), the regulatory coordination decision is nevertheless left to the common law courts adjudicating tort claims applying traditional tort doctrines.