3. Traditional and Modern Pollution

Pollution is a key concern in environmental economics, and economists have used their models to argue that this market failure can be overcome by harnessing market signals. The simple model of pollution control makes the argument clear, but in practice, developing countries use diverse instruments to control industrial pollution. In developing countries traditional pollution is a major cause of disease. We want to reduce pollution because we think it has harmful effects, but how do we establish our knowledge of its effects? Establishing the causality convincingly is difficult, but was done by John Snow in the middle of the nineteenth century in the case of cholera. The simple model of pollution control suggests that we consider the benefit of pollution control, but how do we establish them? For many, environmental economics is synonymous with monetary valuation. Monetary valuation is achieved by using a theoretical model along with an econometric one. In a developing country context, if we dig deeper, we may recognize the role of norms.