Would reducing smog lead to higher earnings?

Yes, say Columbia University professor of Environmental Health Science
Frederica Perera
 and colleagues. They correlate reduced air pollution to higher IQ. When two curves need to match to create causation and correlation arrows, it's easy to do. What started going up in the early 1960s? American Nobel prizes. What went down? Air pollution. You can make the same argument with organic food. Kids of organic farmers have lower IQs than kids in Manhattan.

This association was created using older research which linked prenatal exposure to air pollutants among low-income children with later IQ. Epidemiology is a little scientifically fuzzy and molecular epidemiology is even more so. They created a hypothesized modest reduction of .25 nanograms per cubic meter air (ng/m3) of ambient concentrations of polycyclic aromatic hydrocarbon (PAH) ubiquitous in urban air and then attributed benefits to it they had created. 

By way of comparison, the current estimated annual mean PAH concentration is approximately 1 ng/ m3. The analysis focused on the 63,462 New York City children born in 2002 to women on Medicaid, a group sharing the same socio-demographic characteristics as the cohort studied by Perera and colleagues linking IQ and PAH, and used methods employed in earlier studies estimating earnings potential related to exposures to lead and mercury. Gains in IQ related to the hypothetical 25% reduction in PAH translated to increased lifetime earnings of $215 million.

They previously correlated higher levels of airborne PAH during pregnancy to IQs three points lower at age 5 than children whose mothers had lower PAH exposures. 

The researchers believe their estimate is actually underestimated and that the total economic benefit associated with reduction in prenatal PAH exposure because it does not include estimates of economic impact of neurotoxic, respiratory, and carcinogenic effects also linked with PAH. While based on children born to mothers on Medicaid in New York City, the authors say, the results likely apply to children more broadly. IQ affects academic performance and earnings.

According to Dr. Perera, "Our analysis suggests that a modest reduction in urban air pollution would provide substantial economic benefits and help children realize their full potential."