EPA thorough on clean air

{mosads}
 
As every introductory economics textbook explains, GDP counts some things that don’t actually reflect net increases in welfare, and excludes others that do. For example, the GDP includes goods and services that are paid for medical care to treat pollution-caused asthma, and GDP excludes many things that make us better off but aren’t purchased in a market, such as improved health from regulating pollution. Are clean air and healthier lungs a figment of our imagination? Are we actually better off after we’ve treated a child’s asthma than if we didn’t have to treat it in the first place?
 
Economists call pollution damages “negative externalities,” to reflect the notion that they are not counted in the market price of the goods whose production is causing pollution. A proper cost benefit analysis, such as that carried out by EPA, therefore estimates what the value of these externalities would have been in the absence of pollution standards, and counts them as an avoided cost (i.e. a benefit).
 
Imagine a world in which polluting industries had to pay breathers to endure their pollution.  How much would members of the public insist on?  I would speculate that the amount people would demand to “sell” their clean air to polluters could easily approach oh, say, $2 trillion (EPA’s benefits estimate). In other words, polluting wouldn’t be so profitable and companies would either clean up their act, or find something safer to make.
 
To say that EPA’s analysis is invalid because some of the health benefits have no market price is thus wrong and misleading. It assumes that GDP accurately measures well being, that risks to life caused by pollution shouldn’t be counted as a cost of production, that polluters have every right to harm people’s health without having to compensate them, and that the market is using resources in a way that maximizes returns to society. I would wager that any inner city mom with a child suffering from asthma, neurological damage, and other illness caused by air pollution would think otherwise.

Laurie Johnson is the Chief Economist in the Climate Center at the Natural Resources Defense Council.