How Clean Is Clean? Is 100% Clean Really Worth It?

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Market Failures and the Role of the Government
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Presentation transcript:

How Clean Is Clean? Is 100% Clean Really Worth It?

How Clean Is Clean Really? l Describe your bedroom l Now, clean it up! l What are you going to do... 1 st ? 2 nd ? 3 rd ? ● As you get closer to 100% clean, what becomes greater, cost or benefit?

Is it Really Worth 100% Clean? How much _______ does it take? l time l work l energy l resources l money Is it worth the cost and benefits?

The Answer is Based on… Technology (Do we have the capabilities to clean it now?) Money (Is it available now?) Value (Does everyone have the same?) Priorities (What is most important?) l Can’t the effort to clean up 100% be used more effectively elsewhere?

Welcome to Lake Erie- In the Past: *Beautiful *Clean *Safe to fish swim drink Now it is dirty from… OveruseOverflow from septic tanks Soil runoffIndustrial discharge

Solution #1 Surrounding states should clean the lake 100%. The technology is available to clean it. There is no excuse for not doing the job right.

Solution #2 Cleaning the lake 100% is overkill. ● It doesn’t need to be perfectly clean. ● We can clean up most of the lake for 1/3 the cost and effort for totally cleaning it up. ● We should not overspend for the environment.

Where is the Point Where We Should Stop Cleaning Up? l When it costs too much? l When it becomes too much trouble? l When the benefits stop? l When it is completely clean?

Pollution Clean Up Benefits MSB 0% 100% Pollution Cleanup

Cost to Cleanup Costs MSC 0% 100% Pollution Clean Up

What is the Point Where We Should Stop Cleaning Up? Benefits and Costs (Dollars) MSB MSC 0% 100% Pollution Abatement

How Much Should We Clean Up Lake Erie? MarginalBenefit Marginal Cost of Clean Up of Clean Up Completely 0%=___________ = ____________ Polluted (25%)_____________ (25%) ____________ 25%$500,000 $75,000 (50%)______________ (50%) ____________ 50%$750,000 $175,000 (75%)___________ (75%)____________ 75%$865,000 $290,000 (100%)___________ (100%)______________ Completely Clean 100%$875,000 $590,000

The Results MarginalBenefit Marginal Cost of Clean Up of Clean Up Completely 0% =$0.00 =$0.00 Polluted (25%)$500,000 (25%) $75,000 25%$500,000 $75,000 (50%)$250,000_ (50%)$100,000 50%$750,000 $175,000 (75%)$115,000 (75%)$ %$865,000 $290,000 (100%)$10,000 (100%)$300,000 Completely Clean 100%$875,000 $590,000

What Percentage Should We Clean Up Lake Erie? = Only 75% Why?

Solution: Clean up until the cost and benefits are equal. Benefits and Costs (Dollars) MSB MSC 0% 100% Pollution Abatement

The Answer is Based on… l Technology (Do we have the capabilities to clean it now?) l Money (Is it available now?) l Value (Does everyone have the same?) l Priorities (What is most important?) l Can’t the money to clean up 100% be used more effectively elsewhere?

So… l Is Clean Really Clean? l What does clean really mean? l Should we clean until it is 100% clean? l Should we clean until costs outweigh benefits?

Decisions are Based on… l Values l Priorities l Economics

Whatever the decision, we must remember that our choices… ● Influence the environment ● Have unintended consequences ● Are influenced by rewards