By Jonathan B. Wight

This is not a pretty story!  Chemical pollution costs have the potential to have long gestation times and cataclysmic effects that cannot be adequately accounted for in product pricing.

To read about this important issue, see Andrea Gore and Sarah Dickerson, Endocrine Disruptors and The Developing Brain (2012).

This matters greatly for economics. There are more than 85,000 chemicals used in industrial production, and most of these have not been studied for safety.

There is a ideal version of the Coase Theorem in which private property rights and low transaction costs allow the market to solve externality problems on its own. 

If any chemical harms me, I can costlessly sue and be made whole; knowing this, the expeller of the pollutant will gain my cooperation voluntarily.  The price system will work to properly allocate resources, and there is no need to have government regulations when the private market solution is cheaper and better!

But what if the externality is insidious, making its way into our fetal brains and wrecking its havoc only later in life?  How could anyone prove causation when a pregnant mother exposed to Chemical X in her third month of pregnancy bears a child who 18 years later develops certain severe health issues? 

Ronald Coase himself denounced the view that transaction costs would be low enough in many cases to allow for self-regulation.  The endocrine disruptor story is an example of why that might be so.

I happened to sit next to Andrea Gore on my way up to a conference at St. John Fisher College, in Rochester.  Andrea is a biologist at UT-Austin who studies the ways that pollutants interact with human hormones.

Hormones drive our human systems. And pollutants interfere with those chemical messengers.  The rise in autism and other diseases may be related to this issue.  Are we all like the frog in the slowly heating pot of water?