True or False: An implication of Paul Portney's benefit-cost analysis

of the 1990 Clean Air Act Amendments is that the United States is under-regulating air pollution. Explain. Credit is given for the thoroughness of the explanation.

Answer & Explanation
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Step-by-step explanation

The amendments, according to Mr. Portney's shocking estimate, will double the present $30 billion cost of the air quality standard. However, the advantages will most likely be worth only $14 billion. Mr. Portney openly admits that these estimations are educated approximations. The regulation is less efficient as it costs more to regulate air population but the benefits are fewer. In a world of few resources, cost-benefit analyses must be important to economists. A billion spent on sterilizing the air surrounding oil refineries is a billion less to spend on safer tankers or better tomatoes, for example. And if regulation promotes inefficiency - if the same activity could be accomplished with less money spent elsewhere - the approach becomes even more problematic. The implication of Mr. Portney's analysis is that the United states is thus over-regulating air pollution.





Krupnick, A. J., & Portney, P. R. (1991). Controlling urban air pollution: a benefit-cost assessment. Science, 252(5005), 522-528.