Utility and Rationality

According to the economist, the following two bundles could both be equally efficient:

Individual 1 Income: $100
Individual 2 Income: $800

Individual 1 Income: $450
Individual 2 Income: $450

Forgetting the argument of communism and capitalism, from the environmental or pollution perspective what this would mean is that if you have two players, if the impact/benefit from polluting is the same per dollar value of pollution, then the two bundles above are equally desirable.

I guess the notion of utility for me isn't at logical as it is to others because of the idea of measuring and quantifying individual utilities. The simplest way to measure utility is in units of dollars, but from the political perspective this clearly doesn't make sense. The way an individual perceives utility, and his own utility, is extremely (if not impossible) to measure. For example, one dollar doesn't even necessarily mean the same to one person or another (which is why a punitive damage case will fine a wealthier offender far more). Largely, I think my issue with most of economics is the idea of information, and how information is perceived or interpreted by various actors and then how those actors choose to use it.

First off, information is not complete. Not about the effects of pollution (both positive and negative), not about the causes of the pollution, not about the alternatives to pollution. Often there isn't even the awareness that the pollution is there (out of sight, out of mind). Information is also not complete for the people who try to manage the market-economists, lawyers, politicians. They don't have full information about individual utility, but it'd be impossible to get because actors are not entirely rational or consistent in their preferences, so even if a preference could be quantified, it'd be impossible to have a set algorithm for ordering the set of preferences. The terms "on a whim" and "impulse buy" exist for a reason.

Take for example a chair. Seemingly harmless, yes. Assuming we can judge relative build quality (that it won't collapse when you sit on it) before purchase, there are still many factors that we cannot judge. The chemicals used to assemble it, whether they are volatile and carcinogenic. The chemicals used in the manufacture, and their impact on the environment and the workers at the plant. We also are unaware of the working conditions at the plant, or the ethical preferences of the firm. What is crucial is that, like the law, economics is a representation of only the average representation of a society and is not an immutable matter. This is distinct from the natural laws, the laws of physics. If the duty of the policy maker then is to be the most informed party (or at least the most capable at balancing multiple considerations), then it is the policy maker's role then to set the policies that somehow balance these valuations that the governed individuals make using imperfect information.