CASE STUDY - PROFIT OR POLLUTION?

You own a manufacturing plant which generates a significant amount of air pollution. In order to ensure continuing profitability, you hire a consultant to map out future operating options.

The consultant comes up with two scenarios:

-         Make large campaign contributions to local politicians, later "asking' them to relax air quality standards. The savings of not having to install expensive scrubbers and only being able to operate under favorable meteorological conditions far exceed the amount of the "appropriate" campaign contributions. Also, under this scenario, because you are using the local atmosphere as a sink for your manufacturing by-product, you are creating an externality which converts some of your operating cost into public cost;

-         Do not attempt to relax air quality standards, instead installing the necessary technology needed to bring your plant within acceptable limits.

1.      Which options should you choose?