Environmental laws, Property Rights and Liberty

As stated in the discussion of property rights, no real liberty can exist unless people have the freedom to take possession of the things of the world and to control the use and enjoyment of them. Nonetheless, there is a longstanding nettlesome problem created by the fact that a person’s use of property may have negative effects (“externalities”) that spill over and harm the property or other legitimate interests of other people. Due to the laws of nature, these negative spillover effects are inevitable in a wide variety of situations, and they occur all the time.

Consider, for example, a rock quarry that can operate only by pumping out groundwater that floods into its pit. A result of the pumping, however, is to cause large sinkholes to form on the next-door owner’s farm—effectively destroying the affected farmland. Destruction of the neighbor’s farm is part of the cost of quarrying the rock. It is a “cost of doing business” that the quarry owner is shifting off on the farmer. The quarry forces the farmer to suffer this cost while getting none of the benefits.

It is, of course, very nice to be able to carry on a business in ways that shift off part of the operating costs on other people. But to engage in such a business practice is, to put it bluntly, stealing. It may be “legal” stealing (if the law allows it), but it is stealing nonetheless.

Environmental laws, properly calibrated, are essentially just specialized laws to prevent a specialized kind of stealing. Historically, this function was mostly addressed by a cumbersome and inefficient body of property law known as the law of nuisance (which depends on a case-by-case balancing of interests). However, nuisance law was developed in the Middle Ages and it is, unsurprisingly, simply not up to the task of dealing with the industrial-strength spillovers of modern economic activities.

Modern environmental laws have consequences for liberty since, almost by definition, they impinge on owners’ freedom to use their property in any way they see fit. It is not, however, necessarily hostile to liberty to impinge on the property freedoms of one owner in order to protect valuable property freedoms of another. Whether a particular environmental-law impingement is good for liberty depends on the freedoms affected.

If environmental laws are badly calibrated, of course, they can be distinctly hostile to liberty. Obviously, the governmental power to impinge on an owner’s property freedom can be used for good or for ill—as a way to protect the property freedoms of others and prevent “external” harm or as a legal way to steal value from those who have it. Only the application of strict scrutiny can assure that these laws do not go overboard but remain narrowly tailored to served their legitimate purpose.
There often are, to be sure, difficult “baseline” questions here because “avoiding harm” and “taking benefit” are not conceptually distinct categories: Before one can talk of “stealing,” it must be first established who has the ownership or “entitlement.” Do rock quarries, for example, enjoy some kind of established legal entitlement to destroy their neighbor’s land by pumping groundwater? (At least one court has held “yes.”)

The question of “baselines” is of great importance because there are established “entitlements” to have certain spillover effects, e.g., to cast shadows from your buildings on the neighboring land. But there are many “new” kinds of cases in which the baseline entitlements re spillovers are not so clear.

Perhaps there should be a strong presumption against any rights to spill over unless the entitlement to do so is already clear. Or, perhaps, some broad doctrine of “prior appropriation” would be a suitable default rule for disputes in which allocations of spillover entitlements have not yet been legally declared. There are, however, plenty of clear cases and the existence of hard cases should cause us to turn our backs on the easier ones.
Market Solutions.
Some advocate that the problems addressed by environmental laws, land-use laws and the like would be better handled by relying on market solutions. This is certainly a possibility in some situations, and government should be alert to these possibilities. Market solutions are generally more efficient than command-and-control in dealing with competitions for resources, and the natural tendency of government to aggrandize its own power may cause it to underestimate these solutions.

However, markets have long seemed unable to deal with the problem of stealing. And, as we have seen, the problems legitimately addressed by environmental laws are primarily problems of stealing. Just as government established the legal basis for protecting property in the first instance (the rule of "first possession"), it is seemingly also the only entity that can answer new questions of entitlement as they arise. And while market solutions to the problem of stealing are conceivable (for example, buying off thieves and paying for security or “protection”), the inefficiency of these approaches hardly needs elaboration. A role for government, in the form of environmental laws, seems the only rational solution.