This problem has been the focus of much of the economic literature on water quality. Because benefits are so difficult to measure, economists have long argued that the second-best problem is the most relevant one, at least as far as water quality policy is concerned. In the words of Baumol and Oates, “It is hard to be sanguine about the availability in the foreseeable future of a comprehensive body of statistics reporting the marginal net damage of the various externality-generating activities in the economy.” In contrast to the first-best goal, the ambient standard goal does not require.
