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Abstract: This case is designed to support a discussion of how to apply an economic evaluation of the appropriate level of control of an externality to a real problem with incomplete information of uncertain quality and high political stakes. It sketches the Reagan administration's stance on the issue, explains how regional interests have divided Congress on the desirability of acid rain control legislation, and presents the essential details of a House bill widely felt to have some credibility and political potential. Congressional estimates of the costs of attaining the several different levels of acid rain control possible under the House bill, by several different control methods, are presented and compared to administration estimates of the cost of acid rain damage to agriculture, forests, materials, and lakes.
Learning Objective: The case brings out issues of the marginal costs and benefits of different levels of control, the uncertainty in and comparability of data, and the difficulty of defining costs and benefits.