Air pollution is an ubiquitous environmental threat. Seventy percent of the world's urban population breathes unsafe air. More than one billion people live in cities with unhealthy levels of suspended particulate matter. From 300,000 to 700,000 people die each year as a result (World Bank, 1992). Harm to human health is the primary reason to clean up the air. However, air pollution also reduces visibility and damages crops, forests, ecosystems, and manmade monuments and materials. The resulting economic loss has been estimated at 10 billion dollars for a single urban region where pollution and population levels are far less than in many developing countries (Hall et al., 1992).
Cities and villages in Africa, South and Central America, Asia, the Indian sub-continent, and the Middle East are vastly different from cities in most industrialized countries. Air quality is poor in many urban areas, but reliable data are not consistently collected. Existing data show that air quality problems are more severe than in developed countries; larger and more rapidly growing populations are affected, and the resources available to manage the problem are severely constrained.
Poor air reduces productivity, increases demand for medical services, and damages productive resources such as forests. Policies to increase economic growth and development logically must include provisions to improve air quality.
Protecting health by reducing high levels of pollution is only one of many challenges. Air quality programs compete with the need for housing, sanitation, education, safe drinking water, medical care, transportation, and economic development. Lack of safe drinking water is estimated to contribute to at least three times as many deaths each year as does air pollution (El-Ashry, 1993). What, then, differentiates healthier air from these other urgent social needs? The answer is four-fold. (i) Improved air quality in a region is a public good. (ii) Healthier air can be a joint product of other economic activities, at zero or low marginal cost. (iii) No close private substitutes exist. (iv) Improved air quality affects the shape of the production possibilities frontier because the debilitating health effects of pollution reduce productivity.
Air quality is like other basic needs in the sense that it must be "produced." Human activity by definition produces pollution as an unintended by-product. The most basic laws of physics dictate this (Hardin 1991). Therefore, managing pollution is necessary to produce clean air, just as producing electricity is necessary to run a motor. Improving air quality is equivalent to producing health services (in addition to the benefits from avoiding other negative impacts).
Air quality policy should be viewed as an integral part of a set of much broader social policies, rather than as a stand-alone program. This view implies that the scope of appropriate environmental policies is greater than the scope of traditional regulation and standards or of economic incentive-based programs.
II. AIR QUALITY AND HUMAN WELFARE
Air pollution takes many forms. Two common pollutants worldwide are suspended particulate matter and sulfur oxides. Other common air pollutants include ozone, lead, carbon monoxide, nitrogen oxides, and "toxics." Among thousands of toxics, some of the most prevalent are benzene, vinyl chloride, and arsenic. Breathing elevated particulate is associated with early death, respiratory illness, and reduced worker productivity. Four thousand people died during one five day period of the infamous 1952 London pollution episode (Cochran et al., 1992). Sulfur dioxide also is associated with increased respiratory illness and lost work days. Sulfur, along with nitrogen oxides, contributes to acid deposition, which causes the loss of over $30 billion each year in European forest ecosystem output (Brown, 1993). Ozone's most serious effect may be reduced lung capacity after long-term exposure. …