Pricing the Invisible
In 1990 a Republican president signed the law creating the first great cap-and-trade market, and acid rain fell faster and cheaper than predicted. The finale tests the economists' toolkit against every case in the series, from Pigouvian taxes to bans and standards. Pricing works where damages are diffuse and measurable and the polluter is findable, and fails where the science lags, politics reverses, or nature is the polluter.
Who's who
- George H. W. Bush+2 more episodesPresident who signed the 1990 Clean Air Act Amendments
- Arthur Cecil Pigou+3 more episodesEconomist whose 1920 book proposed the corrective tax
- Ronald Coase+3 more episodesEconomist who argued bargaining under clear property rights beats taxes
- Martin Weitzman+1 more episodeEconomist whose 1974 rule guides choosing between a tax and a cap
- Richard SchmalenseeCo-author of the definitive retrospective on the SO2 trading system
- Robert StavinsCo-author of the definitive retrospective on the SO2 trading system
- James M. BuchananCo-author of the 1962 paper that canonized the term externality
Where it happens
- Jinzu River basin, Toyama, Japan+1 more episodeMitsui's long-honored remediation, the series' fully internalized externality
- European Union+2 more episodesOperates the emissions trading system and carbon border mechanism
Timeline
- 1960Coase publishes "The Problem of Social Cost."
- 1974Weitzman publishes "Prices vs. Quantities."
- November 15, 1990Bush signs the Clean Air Act Amendments creating the Acid Rain Program.
- 1995Phase I of SO2 allowance trading begins.
- 2005The EU launches its emissions trading system for CO2.
- January 2026The EU's carbon border adjustment mechanism enters its definitive regime.
Still debated
The Acid Rain Program's cost savings range widely depending on the counterfactual, and benefit estimates rest on statistical-life valuations. Economists answer that bans and standards won for lead and fine particles because steep-damage cases are where theory favors quantity instruments; carbon border adjustments remain disputed as climate policy or protectionism.
Connected episodes in other series
