Should China Compensate Ethiopia?

First, let’s review. An externality is present when the activity of an agent (or several agents) affects the utility or production possibilities of other agents without compensation. Well, I can’t think of a more crushing example of a negative externality in the realm of sports than the one brought to my attention by Tim Haab at the Environmental Economics blog, titled “What is avoiding asthma worth?”

All over the world individuals with pre-existing health conditions are being affected on a daily basis by harmful pollutants such as ozone, carbon monoxide, and nitrous oxides (just to name a few). Some areas are worse than others. Take Beijing, China, for example – the site of this year’s Olympic games – which could provide one of the worst atmospheres (as far as environmental health concerns go) for the world’s top athletes.

One athlete in particular, Haile Gebrselassie, is a gold medalist in the 10,000-meter run. Gebrselassie was eager to compete this year in the 2008 Beijing Olympics, but to Ethiopian discontent, may have to stay home thanks to China’s poor environmental conditions. At 35 years of age, this could be Gebrselassie’s last chance to add more gold to his stash.

Should China compensate Gebrselassie and/or his Ethiopian nation? What would be China’s incentive to do such a thing?

For future Olympic games bids, how could we avoid this issue? Should the Olympics be used as a way to reward those countries with better environmental conditions? (For the sake of the athletes, of course)

Either way, we’ve now added an additional cost of pollution. Thanks to China’s lax environmental policies, we won’t be able to see one of the world’s best athletes this summer.

But what’s the big deal? It’s just a gold medal. It’s not like these athletes train their whole lives for this and it’s not like we, the fans, wait every four years to witness their hard work and dedication.