Economic Research Informs Environmental Policy Decision Making

Are economists useful people?  We are loved and we are modest but are we contributing to overall well being?   This new paper  raises my confidence in the role of “positivist” analysis.   The authors provide a subtle statistical analysis of a key environmental policy issue.  Do cleanups of toxic waste sites (Superfund) increase local property values?   Until now, the conventional wisdom is that the answer is “no”.   Critics of environmental regulation have been quick to point out its costs.  So, should we end the Superfund cleanup program?   

 Measuring the benefits of environmental regulation remains a hard problem because attributes such as “clean air” or “a non-toxic neighborhood” are not market commodities.  Techniques such as contingent valuation for valuing such non-market goods remain debated.    Using several different data sets at different spatial resolutions, the authors of this Superfund paper conclude that land prices rise in the aftermath of toxic cleanups.  As we try to build “Green Cities” in past industrial areas, this is an important fact.  I have always viewed applied micro studies as offering pieces to plug into a full blown cost/benefit analysis.  This paper offers a clean example.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

2 thoughts on “Economic Research Informs Environmental Policy Decision Making”

  1. “We are loved and we are modest”

    Matthew, you know by now that a bunch of people will happily jump down your blogfigurative throat for making absurd claims; I guess you’re a glutton for punishment 🙂

  2. Although obviously real estate values will capture only part of what’s going on, this seems like a step in the right direction. It’s certainly better than the old-standard method, which was to argue that the dollar equivalent of environmental quality was too hard to measure, and then to assign to it the only number absolutely known to be wrong, namely zero.

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