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The real problem starts at the implementation. Designing a mechanism such that the equilibrium outcomes satisfy the criterion of social optimality is essential, as well as the proper implementation and monitoring of such mechanism. The assumption that each company would simply comply with the new law in the Philippines has never been accepted by the general public without skepticism especially when such law inhibits the optimal profitability of the company. Additional problem is when such law demands an extended unintended cost to the company along the process of compliance.

 

The term compliance has been studied by Feinstein (1990). According to him, the reasons other synonyms are not usually used: "Adherence seems too sticky Fidelity has too many connotations and Maintenance suggests a repair crew. Although Adherence has its adherents, Compliance continues to be the most popular term."

 

Matthews (2001) reported that when the Federal Environmental Protection Agency (EPA) conducted covert in audits of local testing stations in 12 states, 81% of the tests were improperly conducted. The centralized system for testing was quite different from CAAA 1990. The system was overly inconvenient and costly to residents and decentralization was proposed.

 

Non-compliance of one company results to a disadvantage over the other company who complies with the requirement of the law. A large gap between high hopes about impacts and compliance of policies or programs may sometimes significantly differ from and the demonstrated results. Wandersman (2009) reviewed 30 years of work on participation and made several conclusions: [1] realities and lessons are learned from past experiences, [2] theory and research should be used to develop realistically ambitious solutions to social problems, [3] four keys to success can be enhanced by a participatory process that includes key stakeholders in the design and implementation of each key-theory, implementation, evaluation, and resource/system support, [4] and a participatory process is likely to take a long time, promote ownership, meet needs and values, and offer individuals, communities, and nations a sense of control over their own destiny.

 

Compliance is a complex concept and decisions are motivated by a several of factors.  Detection threat and punishment from different sources support the proposition that increased enforcement leads to increased compliance. However, the observed compliance levels are usually higher than the level of enforcement that is needed. This results to the formation of theories based on exceptional risk aversion.

 

The prospect theory is a behavioral economic theory which explains the manner people make decisions that involves risk. Choosing between outcomes that are known includes the evaluation of losses and gains, the potential value of such losses or gains and the final outcome. The model of this theory is symbolic. It tries to model real-life choices, rather than optimal decisions (Kahneman & Tversky, 1979).

 

In rank-dependent expected utility, ranks, not the magnitude of outcomes determines how the probability of an outcome is perceived (Zank, 2004).

 

Meanwhile, the International Network for Environmental Compliance and Enforcement (INECE, 2008) discussed the three stage model in which an integrated process comprised of three stages or steps: [1] identifying potential indicators and selecting an appropriate combination [2] developing indicators through designing and testing and [3] using the indicators to improve program performance and enhance accountability to stakeholders. The best practices of each level must be followed. 

References:

Feinstein, A. R. (1990) On white coat effects and the electronic monitoring of compliance. Arch Intern Med, 150, 1377-8.

International Network for Environmental Compliance and Enforcement. (2008). Performance Measurement Guidance for Compliance and Enforcement Practitioners, 2.

Kahneman , D. & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263-291.

Matthews, H. S. (2001). An Analysis of Pennsylvania's Clean Air Act Compliance Options. Carnegie Mellon: Green Design Initiative.

Wandersman, A. (2009). Four Keys to Success (Theory, Implementation, Evaluation, and Resource/System Support): High Hopes and Challenges in Participation. Am J Community Psychol. DOI 10.1007/s10464-008-9212-x

Zank, H. (2004). Deriving Rank-Dependent Expected Utility Through Probabilistic Consistency. Journal of Economic Literature, Classification Numbers: D81.