Law

http://krugman.blogs.nytimes.com/2011/09/30/markets-can-be-very-very-wrong/

Markets Can Be Very, Very Wrong
Muller, Mendelsohn, and Nordhaus have a new paper in 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.

What MMN 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.

Even with this restricted vision of costs, they find that the costs of
air pollution are big, and heavily concentrated in a few industries.
In fact, there are a number of industries that inflict more damage in
the form of air pollution than the value-added by these industries at
market prices.

http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.5.1649

Environmental Accounting for Pollution in the United States Economy
Nicholas Z. Muller, Robert Mendelsohn and William Nordhaus
Article Citation
Muller, Nicholas Z., Robert Mendelsohn, and William Nordhaus. 2011.
"Environmental Accounting for Pollution in the United States
Economy."American Economic Review, 101(5): 1649–75.
DOI:10.1257/aer.101.5.1649

Abstract
This study presents a framework to include environmental externalities
into a system of national accounts. The paper estimates the air
pollution damages for each industry in the United States. An
integrated-assessment model quantifies the marginal damages of air
pollution emissions for the US which are multiplied times the quantity
of emissions by industry to compute gross damages. Solid waste
combustion, sewage treatment, stone quarrying, marinas, and oil and
coal-fired power plants have air pollution damages larger than their
value added. The largest industrial contributor to external costs is
coal-fired electric generation, whose damages range from 0.8 to 5.6
times value added.

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