Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis.

Abstract

The use of cost-benefit analysis by federal regulatory agencies has expanded greatly in scope and sophistication. Unfortunately, agencies continue to employ private cost, rather than social cost, to evaluate environmental quality regulations. Furthermore, general equilibrium impacts and intertemporal effects of regulations are typically not included in the evaluation. In this paper, the authors estimate the social cost of environmental quality regulations mandated by the Clean Air Act and the Clean Water Act. They construct an econometric general equilibrium model of the United States to demonstrate that social costs estimates diverge sharply from private costs estimates. The authors also demonstrate that general equilibrium impacts are significant and pervasive. Copyright 1990 by University of Chicago Press.