Economists have tended to ignore the political and geographic setting in which economic activity takes place and the body of environmental law and administrative practice that has grown up around pollution problems. These policies are strongly affected by our federal structure, accidents of location and overlapping jurisdictional boundaries, legislative histories, and legal as well as economic determinants of political action.

The following analysis of these interactions concentrates on two interrelated problems. A market economy transmits the costs of site-specific environmental damage to consumers and factors of production geographically distant from the original pollution source, without regard to political or administrative jurisdictions. This shifting poses problems for the design of viable pollution control districts, instruments, and policies at local and national levels. These problems are discussed in the light of interactions among jurisdictions such as population shifts, direct interjurisdiction competition, and the market-propagated environmental cost incidence just mentioned. Throughout, the analysis will draw for examples on site-specific airport noise.