Does clean air have a cost where it makes sense versus where it doesn't? What about human life in general?  

Economists still try to create a metric and a group from the University of Chicago and MIT tackled the financial results of extensive environmental regulations, which have brought cleaner air and health improvements to the United States but also increased the cost of manufacturing and led to reduced industrial productivity along with outsourcing jobs. 

Some economists suggested that more and more regulations encourage companies to become more efficient, thus reducing costs at upgraded plants, but a paper published by the National Bureau of Economic Research contends that the regulations led to a 4.8 percent decline in productivity and reduced profits by nearly 9 percent from 1972-93.  If that's all the negative impact it had, it would be an economic miracle. 

"There are good reasons to think environmental regulations might increase production costs, but we didn't know how large the effect might be," said
Chad Syverson, professor at the University of Chicago Booth School of Business. "We are not saying that the regulations are a bad idea, but we wanted to know the cost."

The paper examined how the total factor productivity (TFP) of manufacturing plants was impacted by the regulations, which went into effect as a result of the Clean Air Act of 1970. The annual cost to companies was about $21 billion, they said.

The Clean Air Act provides a stringent intervention for companies that are found to be polluting. The EPA can dictate installation of pollution abatement technologies on manufacturing plants.

Because not all communities are impacted equally by air pollution, the Environmental Protection Agency each year designates counties as either being in attainment of the standards for air quality or in a nonattainment status. The standards cover ozone, total suspended particulates, sulfur dioxide and carbon monoxide. The manufacturing plants in nonattainment counties are subject to strict enforcement. In order to determine the economic impact of the regulations, the scholars compared changes in the productivity of high-emissions manufacturing plants in non-compliant counties to those of low-emissions plants in those counties as well as high-emissions plants in compliant counties.

They based their work on data gathered by the U.S. Census Bureau of company expenditures and profits. They found that the regulations impacted different kinds of manufacturers quite differently. "The largest declines in TFP are associated with ozone nonattainment, which incidentally is one of the most commonly emitted pollutants among our industries," they wrote.

What was left out is whether or not the regulations worked. A Canada study showed they banned the primary drivers of ozone, and incurred the government costs plus reduced productivity, and it made no difference in ozone at all. All that is known is that the government cost and that business dropped.

Their analysis found that the organic chemical industry — companies that produce turpentine or benzene, for instance — are the most impacted by the regulations. They experienced a 17 percent reduction in productivity during the study period in non-attainment counties. The industry is only regulated for ozone, but had an annual loss of $9.2 billion during the study period when measured in 2010 dollars.

They also looked at how companies increased their prices in order to compensate for their increased costs and studied the ready-mixed concrete industry specifically because it was a specialized industry that dealt with one common product. The study estimated that companies increased their prices by about one percent in response to the regulations. The approach used to studying the impact of regulations brought on by laws could possibly be expanded to study in the impact of other regulations, the scholars said. 

"In principle, this approach can be applied to the costs of regulations that govern firm behavior in a wide range of contexts," the paper says. "We envision similar exercises being fruitful in areas that regulate work and labor conditions, health and safety legislation."

Paper: "The Effects of Environmental Regulations on the Competitiveness of U.S. Manufacturing," Michael Greenstone, John List and Chad Syverson, National Bureau of Economic Research