I don't have a problem admitting that the air is getting measurably cleaner, certainly since the 70s.
But to blindly attribute that to the wonders of capitalism is either naive or obtuse. Capitalism is a wonderful system, but it has its problems, and the recognition of those problems is the weakness of the dogmatic conservatives.
As I pointed out, externalities is one problem. Monopolies are another. A more important issue, and a basic caveat of almost any economic theory of competition and efficiency, is a heavy reliance on perfect information. It is only under conditions of perfect information - about products, prices, or environmental impacts, if you will, that people can process and make economic choices. The problem is that this is rarely the case, and the presumption of such when designing a system of regulation, or non-regulation, as the case may be, is naive, incompetent, and ends up hurting a lot of people. And this is especially naive given that many firms will devote significant resources to flat-out lying about their environmental impact. In the absence of regulation, then what do you do?
I think capitalism can do a lot for the environment in the long run, especially if property rights are assigned and enforceable, and not by default given to industry, which will obviously pollute unrestrictedly until forced, either by law or market to stop. This is not always the case. But to assume that it will work perfectly in the absence of some element of regulation (which seems to be the dog conservatives always pick in this fight) strikes me as either naive or openly corrupt.
As a matter of moral standpoint, I believe that the people do have a right to clean air and water, and that corporations should be held to a high standard which enforces this. Economic theory tells us that no matter who the property right is assigned to, in the presence of perfect information, the outcome will be the same - an economically efficient one. However, in the absence of such a condition, then it is clearly better to hold corporations to a high standard, which of course consumers pay for. The alternative situation would result in higher pollution because of a) tragedy of the commons, b) consumers would likely have little idea of the environmental cost of their cheaper goods, and c) producers would have significant incentive to prevent consumers from finding this information. Given the two alternatives, one will clearly more likely lead to the efficient solution, and it isn't the second one.
I don't have a problem with industry employing lobbyists to forward their cause, be it higher profits and being free to pollute or abuse workers, or whatever. I have a huge problem with the fact that they can essentially buy Congressmen, that their additional profits allow them to create barriers to entry for both other companies and for competing interests with these Congressmen, and that conservatives defend this right dogmatically at cost to both the consumer and society at large.
My point is that the holy grail of capitalism is supposed to be efficiency and fairness. Instead, conservatives at least appear to support a system that believes in incumbency and maintains gaping holes which end up hurting people in a very tangible way.
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"They who would give up an essential liberty for temporary security, deserve neither liberty or security" - Benjamin Franklin
"Don't you see the rest of the country looks upon New York like we're left-wing, communist, Jewish, homosexual pornographers? I think of us that way sometimes and I live here." - Alvy Singer, "Annie Hall"