Introduction

Pollution, in its many forms, is widely regarded as our major environmental problem. Pigou (1932) was perhaps the first academic economist to take it seriously, but recorded expressions of concern go back much further. The use of coal was prohibited in London in 1273, and at least one person was put to death for this offense some time around 1300. Why did it take economists so long to recognize and analyze the problem? Apart from the concern of Pigou, little was done until the 1960s, although elements of the theory of externalities and public goods that would later be useful were developed largely in the 1950s.

One plausible explanation for this lack of interest is that the problem has only recently become competitive, in its severity, with others we face. True, there have been local and temporary episodes, as the unfortunate Londoner would attest, but it is only recently that we have come to fear that “environmental reservoirs” may be filling up over large areas and in ways that may be difficult to reverse.

This view of the world has, in fact, been advanced in some conceptual contributions from economists. Boulding's ”spaceship earth” (1966) suggested that pollution, or at least material residuals from production and consumption activities, must always and increasingly be with us, because the earth is, like a spaceship, a closed system with respect to materials. A related concept developed by Ayres and Kneese (1969) is that of materials balance.