we wanted to reduce damage any further, the next step would be for Sucio to switch from its dirtiest to its intermediate process. But taking that step would cost $1,000 a day, far more than the resulting reduction of $120 a day in damages. In this example, Sucio’s abatement costs are so high that it has no useful role to play in the cleanup effort. A total of 6 tons a day of SO2 emissions is the best we can do here.
Many people find it difficult to accept that a nonzero level of pollution could be optimal. But that must be true whenever emissions reduction beyond some point becomes more costly than the corresponding reduction in damages. If someone insists that the optimal le...
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