Putting a Price on Clean Air

There has been a lot of scholarly discussion in recent years about the importance of putting a price on natural resources.  The pricing issue has been particularly in the limelight in connection with the drought in the western United States.  Indeed, it seems fairly self-evident that, if we give away a scarce resource, people will consume too much of it.

I suppose, then, that we should not be surprised that we have already been one-upped on this issue by the Chinese.  According to Tuesday’s New York Times, diners at a restaurant in Zhangjiagang, near Shanghai, have to pay a fee for the right to breath clean air.  China air pollution

Of course, the pricing mechanism seems flawed, since the diners are paying a fixed cost, rather than the marginal cost, but markets have to start somewhere!

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