Introduction The intuitive view that residential prices reflect the capitalized value of desirable (and undesirable) housing@ location@ and environmental attributes has motivated many hedonic analyses of cross-section property value data. Hedonic property value functions use multiple regression techniques and locational features. Under the assumption that equilibrium prevails in the housing market@ partial@ derivatives are interpreted as implicit equilibrium prices. If some measure of air quality is included in the property value model@ this type of analysis will yield and estimate of the marginal benefit of the existing level of air quality@ which may then be aggregated across all households in a given metropolitan area. However@ for three important reasons@ property value/air quality studies generally provide no guidance for assessing whether attainment of existing air pollution standards will lead to a socially efficient use of air quality resources. First@ benefits estimates derived from property value equations do not represent all the benefits of pollution control@ but only those health and aesthetic benefits capitalized in residential property prices. Second@ because hedonic functions are equilibrium relationships@ they reveal nothing about the underlying demand for clean air and cannot be used to be determine the benefits of a discrete improvement in air quality. And third@ the hedonic property value approach ignores the fact that changes in air quality may lead to changes in land use patterns as well as changes in residential property values.