MY COLLEAGUE writes that the decision to drop the EPA's new ozone regulations, while unfortunate in environmental terms, might be reasonable given the economic situation. And that's certainly the way I would instinctively have looked at it: as a trade-off between environmental goods and economic costs. But Paul Krugman makes a fascinating argument that under current circumstances, this perspective is completely wrongheaded:



And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money—but that's the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.

On this view, you could imagine arriving at ozone regulation the other way around, in the search for a motor to drive economic recovery. If recovery is going to come, it's not going to come from consumers. Too many consumers are still trying to deleverage from losses sustained in the housing crash, too many are unemployed, and the rest are too scared by the prospects of weak growth in the future to spend any money. Corporations, however, are in a different situation: profits are at 60-year highs, and they're sitting on mountains of cash. They're not spending it, not because they can't afford to, but because the prospects for growth are too weak to justify investment in new equipment or employees. This is entirely rational behaviour on their part; but if the economy is going to get moving again, somebody has to start spending. If only there were some way to push corporations to start investing that money, in a way that was fair across a sector and didn't disadvantage any particular company too severely relative to competitors, and that also accomplished some public goal so clearly worthy that it could be justified on its own terms! But what type of action could possibly meet those criteria?

Meanwhile, Motoko Rich and John Broder report in the New York Times, research on the costs and benefits of previous environmental regulations backs up Mr Krugman's view.

For example, when the Environmental Protection Agency first proposed amendments to the Clean Air Act aimed at reducing acid rain caused by power plant emissions, the electric utility industry warned that they would cost $7.5 billion and tens of thousands of jobs. But the cost of the program has been closer to $1 billion, said Dallas Burtraw, an economist at Resources for the Future, a nonprofit research group on the environment. And the E.P.A., in a paper published this year, cited studies showing that the law had been a modest net creator of jobs through industry spending on technology to comply with it.

Let's be clear here: tightening environmental regulations in ways that require companies to spend rather than hoard profits is not really like smashing windows in order to give work to glaziers. When you smash and replace a window, you don't get any added value, unless of course you upgrade to really nice windows. When you require industries to meet tighter ozone standards, on the other hand, you save thousands of people's lives every year. But the point Mr Krugman is arguing is more crucial for the current economic debate. He's saying that under current conditions, ie until we enter a sustained recovery and companies start spending down their cash reserves, requiring businesses to spend more money doesn't cost jobs; it creates them. I'd be curious to see a conservative response that starts by acknowledging that businesses are not in fact investing their profits and cannot do so unless something nudges them, and then explains what's wrong with Mr Krugman's argument.