Paul Krugman: When Industry Pollutes, We All Pay a Steep Price

Economics professors Nicholas Z. Muller, Robert Mendelsohn and William Nordhaus have a new paper in the latest edition of the American Economic Review that should be a major factor in how we discuss economic ideology. It won’t, of course, but let me lay out the case anyway.

In their paper, “Environmental Accounting for Pollution in the United States Economy,” what Muller, Mendelsohn and Nordhaus do is estimate the cost imposed on society by air pollution, and allocate it across industries. The costs being calculated, by the way, don’t include the long-run threat of climate change; they’re focused on measurable impacts of pollution on health and productivity, with the most important effects involving how pollutants — especially small particulates — affect human health, and use standard valuations on mortality and morbidity to turn these into dollars.