Anacostia River, tributary of the Potomac River, Washington, DC from Chesapeake Bay Program web site
Clean air and clean rivers cannot be produced in neat packages or in discrete time units to sell at so much per package or so much per hour. They can't be marketed to individual consumers in the way other consumer goods and services can. There is no easy way via the market place that consumers can make their desires for these goods known. Oh, they can complain and protest when they see the dirty water in the river and when their children have an asthma attack on a summer's day long hike.
Not only can we not easily choose via the market place how clean we want our rivers and our air to be, but our buying decisions of other products are leading us to get dirtier air and dirtier water than we would have ever wished for.
"Well how can that be?" you ask. Well the answer is that many of the products we buy, when they are produced, cause the water in our rivers and bays and at our ocean beaches to become dirty; and the air we breathe to be polluted.
When we consumers buy electricity to run that air conditioner to cool our homes, the prices we pay for the electricity covers much of the cost of that electricity. It covers the wages and salaries of the workers whose labor produced that electricity. It covers the fuel costs, whether that be coal or natural gas or nuclear. And it covers payments for capital costs - interest on business loans to the electric company producing the electricity, land and rents for buildings that house that electric company and dividend payments to holders of stock in the company. If the price that the electric company charges for its electricity doesn't cover all these costs it would eventually have to shut down, since it would be continuously losing money.
There is a similar story when we buy chicken to barbecue in our back yard. That two to three pounds of chicken breasts and wings will certainly be delicious, especially if Dad is expert with the grill. And the prices we pay for that chicken will cover much of the costs to produce that chicken. It will cover the cost of the farm laborers who work on the farm and who work at the chicken processing plant and the cost of the rents that the farmer pays on land and buildings where the chickens are housed and dividends or returns to investors who have invested in this particular chicken business. Just as the electric company has to price electricity to cover all its costs, the price at which the chicken company sells its chicken will have to cover all its costs or it will eventually have to shut down.
If this were the end of the story, that would be fine. It is good and it is fair that the price we pay for electricity covers all the costs it takes to produce it. And it is good and fair that we pay a price for chicken that covers all the costs it takes to produce chicken. If the prices we pay didn't cover these costs we would soon see them disappear from the market place.
But more than that, this allows our decisions of how much electricity we buy and how much chicken we buy to be based on the relative costs to society to produce them. And if the price of electricity should rise because the cost of its production were to rise while the price of chicken were to fall because its production costs were to fall, we might decide to buy a little more chicken and spend more time barbecuing in the back yard while we run the air conditioning inside just a little bit less.
But what about that dirty river and dirty air? Where does that come in?
Well it turns out there is a cost of producing electricity and chicken that market prices are not covering. When the chicken farmer, especially a large industrial chicken farmer, produces chicken meat she is also producing chicken dung and lots of it. Where does it go? Well some of it can be directly washed away and ends up in storm drains that empty into the river. Some of it is turned into fertilizer to be spread on crops and lawns, some of which is also washed into storm drains and into the river. Even with sophisticated water treatment the run off still allows too much chemicals like nitrogen to enter our rivers. As you might guess this can raise havoc on the river water quality.
I live near the Potomac River in Washington , DC. It is not recommended that you eat any fish that you can catch in the Potomac River, and it is not safe for your health to swim in it. It was not always thus. George Washington probably swam in the Potomac, and we know from his daily Journal that the 6th President of the United States, John Quincy Adams swam in the Potomac every day for years. Now not all of the dirty water of the Potomac is the result of raising chickens, but a lot of it is.
Caveat. The Potomac River is now cleaner than it was 10 years ago, thanks to environmental regulations that have gone into effect. Some of those regulations cause chicken prices to rise.
No one is paying for the loss of clean Potomac River water. The farmer doesn't pay anyone for that loss. So there is no need for her to include it the price of her chicken. The price of the chicken is lower than it would be if the farmer had to pay for using up clean Potomac River water and because the price is lower, she sells more chicken, we buy more of it, and we get a dirtier Potomac River than we wanted.
Similarly, when electricity is produced using coal or fuel oil, ash particles are released into the air, making the air less clean, so much so that it can be a health hazard. Note, using natural gas for electricity generation releases fewer ash particles than does coal, and using nuclear power doesn't release ash particle (there are other issues with nuclear however). The utility company pays no one for the loss of air quality. It is not included in the price of electricity. Since the price of electricity is lower, they sell more and we buy more and we get lower quality of air than we might wish.
Caveat. Power companies face regulations that force them to lower ash and carbon dioxide emissions, and they have been having a good effect. Those regulations cause electricity prices to rise.
Now, for climate change. Producing electricity with coal, and with natural gas also, but less so, releases the gas carbon dioxide into earth's atmosphere. Scientist have compiled very strong evidence that this is causing earth's temperature to rise and causing climate change that could have drastic consequences for life on the planet. The cost of this rise in the temperature of the earth is not captured in the price of the electricity that we buy (caveat, there are some government rules that electric power plants would have to abide by and that require lower carbon dioxide requirements and increase the price of electricity). Nonetheless, much of carbon dioxide emissions by electric companies are not included in the price we pay for electricity. As a result we produce and use more electricity than we would if the price were higher and we get more global warming and more climate change than we would wish for.
Regulations on carbon dioxide and the price of electricity
Natural gas and electricity generation
John Quincy Adams swimming in the Potomac River
Chicken waste and dirty water