By Daniel Feenberg
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Additional resources for Measuring the Benefits of Water Pollution Abatement
3 Economic Theory of Benefit Measurement 1. Introduction Basic r e a s o n s for m a r k e t failure in public goods p r o d u c t i o n w e r e ex plored in C h a p t e r 2. T h e conclusion r e a c h e d there w a s that the private sector is likely to u n d e r p r o d u c e public g o o d s . T h a t conclusion leads natu rally to the subject of this c h a p t e r : H o w can g o v e r n m e n t decide w h a t public goods to p r o d u c e and in w h a t quantities? H e r e , w e c o n c e n t r a t e on basic issues of o p t i m u m public g o o d s p r o d u c t i o n .
3) directly and use it to plan public good p r o d u c t i o n . 3). 3) suggests that t h e task is hopeless b e c a u s e of the detailed information required for m a n y c o n s u m e r s and m a n y g o o d s . Progress is possible b e c a u s e , in a well-functioning m a r k e t e c o n o m y , m a r k e t d a t a contain information that can b e used to estimate t h e benefit side of t h e socially o p t i m u m public good p r o d u c t i o n equation. E v e n t h o u g h m a r k e t s may not b e able to p r o vide public g o o d s without g o v e r n m e n t intervention, they p r o v i d e valu able d a t a to estimate benefits from public g o o d s p r o d u c t i o n if the m a r k e t s are o t h e r w i s e functioning properly.
Benefit analysis should constitute an antidote to this bias. T h e basic argument of this section has b e e n that there is a strong pre- 34 Welfare Economics and the Basis of Benefit Measurement sumption that private a g r e e m e n t s provide too little e n v i r o n m e n t a l protection. G o v e r n m e n t s m u s t intervene if pollution a b a t e m e n t is t o b e at t h e level justified b y benefits and c o s t s . T h e bias in the political s y s t e m is also likely to be against a d e q u a t e pollution a b a t e m e n t , b u t m a y n o t b e as serious as the bias in t h e private sector.
Measuring the Benefits of Water Pollution Abatement by Daniel Feenberg