One role of government in a market economy is enforcement of property rights. You could sue harmful polluters if you owned property and your property was damaged by pollution. Lawsuits may work fairly well when pollution can be traced directly to a given polluter and the damage can be shown to be caused by that party’s effluent. But suppose a firm had the right to pollute. Your only remedy might be to pay the firm to reduce pollution—if it were worth it to you.
Who has rights to use the environment? This was a crucial issue in the 1879 case of Sturges v. Bridgman. Sturges, a doctor whose office abutted manufacturing space already occupied by Bridgman, a confectioner, added an examination room next to the confectioner’s kitchen. Noisy equipment kept the doctor from examining patients with a stethoscope in the new room, so he sued to prevent the confectioner from operating the equipment. An injunction was granted on the grounds that the machinery imposed external costs on the doctor. (Consider the possibility, however, that this injunction imposed external costs on the candy maker, who previously had the right to operate noisy equipment.)
Both private and public lawsuits to protect the environment have some advantages. First, victims of pollutants may be compensated for their losses—and they may not have other enforcement methods. Firms have incentives to clean up if the compensation paid exceeds the costs of cleaning up. Second, successful lawsuits alert other polluters to new liability limits, encouraging these firms to adopt cost-justified precautions to avoid future damage claims.
However, such a method also has several disadvantages. Firstly, legal procedures are slow and costly. Cases tried today have been initiated, on average, two to four years earlier. Furthermore, such solutions are impractical if the damaged party lacks the resources to bring a suit. These solutions alone may leave society saddled with excessive waste. A slightly different problem is that if there are numerous polluters and pollutees, it may be difficult to determine who harmed whom and to what degree. Lawsuits would face almost insurmountable difficulties in solving problems of fouled air in crowded industrial areas.
On a more positive note, legal precedents can alter the behavior of other firms, which may reduce their emissions to avoid costly litigation. Legal remedies work best where the number of polluters is small and their victims are few and easily identified. And yet in areas like Love Canal, New York, and Times Beach, Missouri, for residents who personally experienced the chaos of areas polluted by toxic chemicals, it was nigh impossible for them to get compensation for their losses. Fearful for their own health and that of their children, and faced by plummeting property values and a maze of red tape when they sought restitution, these victims learned how hard it can be to correct the harm done by even easily identified polluters if the pollution happened long ago.
Regulations and Prohibition
Direct regulation is a politically popular remedy for environmental damage. Complete prohibition may be desirable in the case of extremely dangerous materials (e.g., plutonium or other powerful carcinogens). When total bans on certain pollutants are too costly relative to the benefits, the government limits noxious wastes through regulations and standards.
Regulation is costly to administer and provides firms no incentives to reduce pollution once a standard is met. Every stringent rule incites imaginative attempts to discover loopholes around it. This typically results in an incredibly complex patchwork of directives to prevent cheating or avoidance. In some instances, there may be no acceptable alternatives to direct regulation. We need to recognize, however, that the quality of life depends at least as much on production and economic growth as it does on purity, and that there are trade-offs between these goals.