Common law legal actions can easily handle the simple case in which one property owner causes obvious harm to a neighbor. But what about the not so simple case?
By Jonathan H. Adler
“At the heart of free market environmentalism is a system of well-specified property rights to natural and environmental resources,” explain Terry Anderson and Donald Leal in their seminal book, Free Market Environmentalism. Whereas conventional analyses characterize environmental problems as examples of “market failure,” free market environmentalism (FME) identifies the lack of markets—and in particular a lack of enforceable and exchangeable property rights—as the source of environmental problems. To remedy such ills, FME proponents advocate the extension of property rights to ecological resources so as to facilitate their use and protection in a manner consistent with individual preferences, including any preferences for a clean and healthy environment. But are all environmental problems amenable to free market solutions?
A strong case has been made for FME with regard to many, if not most, natural resources. Property rights solutions are applied relatively easily to questions of natural resource management. It has been demonstrated theoretically and empirically that natural resources tend to be managed more efficiently and sustainably under property institutions than under most available political or regulatory alternatives. As a general rule, those resources incorporated into property institutions are better protected and managed more sustainably than their unowned or politically managed counterparts. Fish stocks, for example, under catch-share arrangements are managed far more sustainably than those governed by conventional regulation or left in the open-access commons. And privately owned forests exhibit higher rates of forest growth than those managed by the government or left in the public domain.
Environmental problems extend well beyond questions of natural resource management, however. Many major environmental concerns are related to pollution. Such problems arise out of conflicts between competing property uses. Activities undertaken on some lands cause the generation of waste streams or other byproducts that, when uncontrolled, infringe upon the use and enjoyment of other lands or degrade resources that are held in common. Air and water pollution are prime examples, and global environmental concerns, such as climate change, loom large on the horizon.
At one level, pollution problems involve incompatible land uses and a failure to adequately define rights. Defining the rights enables landowners to resolve conflicts through voluntary exchange. According to Anderson and Leal, “The free market environmental approach to pollution is to establish property rights to the pollution disposal medium and allow owners of those rights to bargain over how the resource will be used.” Yet even once the contours of the respective property rights are defined, these rights must be recognized and enforced. If property rights are violated or voluntary bargains breached, there must be a remedy if pollution is to be controlled.
Most free market environmentalists advocate the use of common law legal institutions to protect property rights and help prevent pollution. The reasoning is that the common law, with its emphasis on protecting property rights from interference by others through the doctrines of trespass and nuisance, is superior to administrative regulation at controlling pollution. Again, Anderson and Leal: “there is abundant evidence that the common law of property, nuisance, and torts is a way of making people accountable for their waste.” Yet the evidence to date is more equivocal than advocates have acknowledged.
Common Law Conundrums
Critics of the property-based framework suggest that transaction costs, collective action problems, and difficulties with scientific proof make the common law an unsuitable alternative for contemporary environmental regulation, even if it may be a useful supplement. Others argue that common law litigation is a poor fit for the particular nature of modern environmental injuries and that regulatory measures supplanted common law remedies because the latter proved incapable of solving modern environmental woes. The conventional wisdom, as articulated by noted environmental law professor Joseph Sax, is that “the traditional common law remedies were utterly inadequate to deal with contemporary environmental problems.”
Some who are otherwise sympathetic to property rights and market-based policy solutions have expressed doubts about exclusive reliance on the common law, as well. Law professor Richard Epstein, for example, argues that common law actions may work “tolerably well” for relatively simple cases, such as when a factory pollutes the land of its neighbor, but that transaction costs are “prohibitive” when pollution is distributed across many properties through common resources, such as water and air, and affects many parties. Others fear the failings of the contemporary tort system far exceed those of the modern environmental regulatory state, and some who have advocated greater use of common law actions have second thoughts when common law nuisance theories are applied to large-scale problems like global climate change.
Common law legal actions can easily handle the simple case in which one property owner causes obvious harm to a neighbor. If emissions from a cement plant foul a downwind property owner’s air, causing clear damage, a contemporary nuisance action provides an adequate means of redress and can also provide a powerful incentive to avoid potentially polluting behavior in the first place. But what about the not so simple case? It is one thing to urge nuisance remedies when a factory dumps sludge into a pond owned by someone else, quite another when dozens or even hundreds of factories (or thousands of automobiles) emit invisible pollutants into the air or water, causing effects on numerous rights holders downwind or downstream. Even if property rights in environmental resources are fully specified—an implausible assumption—are common law causes of action a viable replacement for pollution control regulations?
Where numerous rights holders are affected by a single firm’s polluting behavior, it may be difficult or costly to organize a response. If the harm is spread across a wide area and affects numerous property owners, no individual owner may have suffered a harm sufficient to justify bearing the costs of organizing her neighbors. Even if the collective benefit to all of the rights holders along a given stream might justify the costs of filing a suit, transaction costs and free rider problems could conceivably prevent the victims of pollution from organizing to put an end to it.
Are such concerns about transaction costs overstated? Perhaps. Efforts by citizens to influence the legislative and administrative process are plagued by collective action problems of their own, yet some degree of organizing does occur. Where pollution problems are severe enough, property owners have a substantial incentive to develop associations and firm-like institutions to reduce the transaction costs involved with protecting rights and negotiating solutions to incompatible uses. In addition, using the property rights framework as the foundation for environmental protection does not preclude legislative action to reduce obstacles to worthy legal actions.
Coordination problems and transaction costs were faced by the owners of riparian rights in British rivers, largely fishing clubs, in the decades following World War II, but this did not bar their efforts to protect their rights. In 1948, several fishing club members joined to form the Angler’s Conservation Association (ACA). The ACA has helped fishing clubs pursue injunctions against upstream pollution ever since. The common law developed means of dealing with harms that are spread across numerous potential plaintiffs, none of whom would have sufficient incentive to file suit on their own.
Back to Basics
Is the focus on the common law misplaced? Perhaps. What appeals about the common law may not be litigation so much as the principles upon which common law actions were based. The common law focused on the recognition and vindication of defined rights in resources. As a consequence, common law adjudication reinforces and facilitates private ordering and advancement of subjective value preferences, particularly insofar as common law decisions leave the parties in a position to negotiate around a court’s judgment. As a consequence, common law adjudication of environmental disputes fosters decentralized decisionmaking as well as generating and uncovering information about preferences and scarcity. Common law cases are, by and large, context-specific and occur case by case. Where common law courts err, the consequences of such mistakes are rather confined, and there is an ability to learn and correct such mistakes in the future.
If these features are what make the common law appealing, it may be possible to reconceive the government’s role in environmental protection as vindicating, enhancing, or building upon the common law rather than as erecting an alternative, competing regulatory structure. Even if pure common law approaches are not viable, greater definition of property rights in ecological resources and the application of harm-based regulatory approaches could move environmental protection in a market-oriented direction. Defining rights to threatened resources creates opportunities for property owners and offending facilities to develop new means of reducing the environmental impacts of polluting behavior.
If the common law is to be taken seriously as a viable alternative to conventional regulation, much work needs to be done. Making the case for the common law requires additional research and analysis into how common law systems operate in practice to address environmental concerns, how they can be improved, and how they compare with regulatory options. In the alternative, it is time for free market environmentalists to reconsider what made the common law attractive in the first place and develop ideas for regulatory or other mechanisms to resolve pollution problems while respecting property rights and facilitating market exchange.
Is the common law a solution to pollution?
Although common law actions can handle localized pollution problems, transaction costs can be prohibitive when pollution is distributed on a wider scale. Free market environmentalists should reconceive the government’s role in environmental protection as vindicating, enhancing, or building upon the common law rather than erecting an alternative, competing regulatory structure. Free market environmentalists must reconsider what made the common law attractive in the first place and develop ideas for regulatory or other mechanisms to resolve pollution problems while respecting property rights and facilitating market exchange.
Jonathan H. Adler is professor of law and director of the Center for Business Law & Regulation, Case Western Reserve University School of Law. He can be reached at jha5@case. edu.