| Neo-classical economics tells us that markets reduce costs and increase social welfare. It also teaches that pollution not properly accounted for is a classic economic externality. That is, if clean air and clear water are not properly valued, degrading them reduces economic efficiency, impacts social welfare, and increases social costs. Pollution not-paid-for represents a market failure.
In the early 1990s, officials in President George H.W. Bush’s administration pioneered the concept of using markets for pollution rights to fix this inefficiency in order to arrest the primary causes of acid rain...............................................Full Article: Source
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