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TWO THEORIES OF ENVIRONMENTAL REGULATION

Published online by Cambridge University Press:  24 June 2009

John Hasnas
Affiliation:
Ethics and Law, McDonough School of Business, Georgetown University

Abstract

The over-exploitation of commonly-held resources is typically analyzed as an instance of market failure that calls for legislation to internalize the social costs that private activities impose on the environment. In this article, I argue that to the extent that this analysis ignores the regulatory effect of the common law, it is unsound. In The Tragedy of the Commons, Garret Hardin points out that there are two solutions to the tragedy: privatize the resource or restrict access to it. Environmental legislation is a means restricting access to the commons. The evolutionary development of common law is a means of privatizing the commons. These represent alternative methods of environmental regulation. Proper public policy analysis requires a comparative assessment of the efficacy of these methods for resolving any particular environmental problem. In many, if not most cases, such an assessment will show common law regulation to be superior to environmental legislation.

Type
Research Article
Copyright
Copyright © Social Philosophy and Policy Foundation 2009

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References

1 Hardin, Garrett, “The Tragedy of the Commons,” Science 162, no. 3859 (1968): 1243–48Google ScholarPubMed.

2 See ibid., 1244.

3 See ibid., 1246–47.

4 See ibid., 1245.

5 See ibid., 1243.

6 See ibid., 1243.

7 This logic applies even to species that have no commercial value in themselves. Farmers and ranchers kill gray wolves because they gain the full benefit of the livestock they thereby protect. Loggers eliminate the habitat of spotted owls because they gain the full benefit of the wood they harvest. Oil companies disrupt the mating patterns of caribou because they gain the full benefit of the oil they extract. Yet these parties share the cost of the loss of species with the world at large. Further, voluntarily refraining from their profit-making activity will not save any animals, since others will move in to exploit the opportunities they forgo.

8 In “The Tragedy of the Commons,” Hardin notes the old saying: “Flowing water purifies itself every 10 miles.” Ibid., 1245.

9 Sustainable development is defined as “development which meets the needs of the present without compromising the ability of future generations to meet their own needs.” World Commission on Environment and Development, “Our Common Future,” delivered to the UN General Assembly, UN Doc. A/42/427 (August 4, 1987).

10 This does not imply that ethical exhortation cannot play a subsidiary role in advancing public policy solutions. For example, efforts to address environmental problems by restricting access to the commons may be significantly aided by ethical exhortation. To the extent that such exhortation creates a climate in which compliance with the restrictions is seen as a social good, it can lower the costs and increase the efficiency of enforcing the restrictions.

11 For a more precise account of the market failure argument, see Cowen, Tyler, “Public Good and Externalities: Old and New Perspectives,” in Cowen, Tyler, ed., The Theory of Market Failure: A Critical Examination (Fairfax, VA: George Mason University Press, 1988), 13Google Scholar; and Freidman, Milton, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), 3032Google Scholar.

12 The most significant examples of air pollution control legislation are the Air Quality Act of 1967, 90 Pub. L. No. 148, 81 Stat. 485 (1967); the Clean Air Act Amendments of 1970, Pub. L. No. 91-604, 84 Stat. 1676 (1970); the Clean Air Act Amendments of 1977, Pub. L. No. 95-95, 91 Stat. 685 (1977); and the Clean Air Act Amendments of 1990, Pub. L. No. 101-549, 104 Stat. 2399 (1990).

13 The most significant examples of water pollution control legislation are the Water Pollution Control Act Amendments of 1972, Pub. L. No. 92-500, 86 Stat. 816 (1972); the Clean Water Act of 1977, Pub. L. No. 95-217, 91 Stat. 1566 (1977); and the Water Quality Act of 1987, Pub. L. No. 100-4, 101 Stat. 7 (1987).

14 The exception to this is cap-and-trade legislation, discussed below in Section V.C, which is a hybrid form of legislation that combines restricting access—the cap—with privatization—the trading.

15 See, e.g., the SchoolHouse Rock video “I'm Just a Bill.” Frishberg, David, I'm Just a Bill (ABC Publishing, 1973)Google Scholar.

16 Blackstone, William, Commentaries on the Laws of England (Oxford: Clarendon Press, 1765), 67Google Scholar. Harold Berman explains that “The common law of England is usually said to be itself a customary law. What is meant, no doubt, is that the royal enactments established procedures in the royal courts for the enforcement of rules and principles and standards and concepts that took their meaning from custom and usage. The rules and principles and standards and concepts to be enforced … were derived from informal, unwritten, unenacted norms and patterns of behavior.” Berman, Harold J., Law and Revolution (Cambridge, MA: Harvard University Press, 1983), 480–81Google Scholar. For a fuller account of the nature of the common law prior to the nineteenth century, see Hasnas, John, “The Depoliticization of Law,” Theoretical Inquiries in Law 9, no. 2 (2008): 536–41CrossRefGoogle Scholar.

17 Ferguson, Adam, An Essay on the History of Civil Society (1767; New York: Cambridge University Press, 1995), part 3, sec. 2Google Scholar.

18 This point, which is frequently introduced as an advantage of legislation, is significantly overstated. The common law is not restricted to addressing harm that has already occurred. It can operate prospectively through the mechanism of the injunction. One may sue at common law to enjoin others from engaging in activities that threaten significant future harm. However, the evidentiary standards to obtain an injunction are often quite high. To be granted an injunction that restricts other citizens' freedom of action requires, in most cases, that the plaintiff demonstrate that the defendants' activities pose a high probability of irreparable harm. (But see note 49 below, discussing the lower evidentiary threshold for obtaining an injunction in cases of environmental damage due to trespass and nuisance.) Therefore, it is fair to say that legislation can act preventatively in a wider range of cases than does the common law.

19 N.J. Stat. Ann. sec. 2C:7 (West 2007).

20 See, e.g., Buchanan, James M. and Tullock, Gordon, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1962)CrossRefGoogle Scholar; Olson, Mancur, The Logic of Collective Action: Public Goods and the Theory of Groups (Cambridge, MA: Harvard University Press, 1965)Google Scholar; Niskanen, William A., Bureaucracy and Representative Government (Chicago: Aldine, Atherton, 1971)Google Scholar; Shughart, William F. II and Razzolini, Laura, eds., The Elgar Companion to Public Choice (Cheltenham: Elgar, 2001)CrossRefGoogle Scholar; Benson, Bruce L., “Understanding Bureaucratic Behavior: Implications from the Public Choice Literature,” Journal of Public Finance and Public Choice 8, nos. 2-3 (1995): 89117Google Scholar; and Miller, Gary J., “The Impact of Economics on Contemporary Political Science,” Journal of Economic Literature 35, no. 3 (1997): 11731204Google Scholar.

21 When retiring as Senate majority leader in 1994, George Mitchell, who left the Senate with the highest reputation for integrity, gave an exit interview to National Public Radio. To explain what made the long hours and aggravating work worthwhile, he recounted how, because of his position as majority leader, he was able to get the Clinton administration to reverse an order requiring the federal government to purchase recycled paper—presumably, a measure that would serve the common good—in order to protect the jobs of workers in paper mills in his home state of Maine. He then related how, a few weeks later, a mill worker came up to him “shaking with emotion” to tell him how much saving his job meant to him and how that moment was “indelibly imprinted on [his] mind” and was what “makes all the aggravation worthwhile.” All Things Considered: An Exit Interview with George Mitchell (NPR radio broadcast, October 17, 1994).

22 Fuller, Lon L., “Human Interaction and the Law,” in The Principles of Social Order: Selected Essays of Lon L. Fuller (Durham, NC: Duke University Press, 1981), 219Google Scholar.

23 Ibid., 220.

24 Few theorists appreciate just how recent the advent of stare decisis is. “Although most modern lawyers and scholars conceive of the doctrine of stare decisis as a formative element of the common law, this is an ahistorical understanding of the development of the common law. The doctrine of stare decisis, the idea that the holding of a particular case is treated as binding upon courts deciding later similar cases, is a late nineteenth-century development and represents a clear doctrinal and conceptual break with the prior history of the common law.” Zywicki, Todd, “The Rise and Fall of Efficiency in the Common Law: A Supply-Side Analysis,” Northwestern University Law Review 97 (2003): 1584–87Google Scholar (footnotes omitted).

25 For a more detailed account of the developmental history of the common law, see Hasnas, John, “Hayek, the Common Law, and Fluid Drive,” New York University Journal of Law and Liberty 1, no. 1 (2005): 8198Google Scholar.

26 For another account of the relationship between conflict and the evolution of solutions to the tragedy of the commons, see McCay, Bonnie J., “Emergence of Institutions for the Commons: Contexts, Situations, and Events,” in Ostrom, Elinor et al. , eds., The Drama of the Commons (Washington, DC: National Academy Press, 2002), 370–72Google Scholar.

27 Demsetz, Harold, “Toward a Theory of Property Rights,” American Economic Review 57 (1967): 347Google Scholar.

28 See Berman, Harold J., Law and Revolution (Cambridge, MA: Harvard University Press, 1983), 349–50Google Scholar.

29 See Benson, Bruce, “The Spontaneous Evolution of Cyber Law: Norms, Property Rights, Contracting, Dispute Resolution, and Enforcement without the State,” Journal of Law, Economics, and Policy 1 (2005): 269348Google Scholar.

30 Demsetz, “Toward a Theory of Property Rights,” 352.

31 See Restatement (Third) of Property, sec. 2.15 (2000). This rule “can be traced back in the common law at least as far as the 13th century.” Ibid., comment 1.

32 Rabin, Edward H. et al. , Fundamentals of Modern Property Law, 4th ed. (Westbury, NY: Foundation Press, 2000), 789Google Scholar.

33 Carol Rose makes this point by stating that property owners have a duty to “make and keep their communications clear” because “clear titles facilitate trade and minimize resource-wasting conflict. If I am careless about who comes on to a corner of my property, I invite others to make mistakes and to waste their labor on improvements to what I have allowed them to think is theirs. I thus invite a free-for-all over my ambiguously held claims, and I encourage contention, insecurity, and litigation—all of which waste everyone's time and energy and may result in overuse or underuse of resources. But if I keep my property claims clear, others will know that they should deal with me directly if they want to use my property. We can bargain rather than fight; through trade, all items will come to rest in the hands of those who value them most.” Rose, Carol, “Possession as the Origin of Property,” University of Chicago Law Review 52 (1985): 8183CrossRefGoogle Scholar.

34 For a good account of the private “common rights” that evolved at customary and common law, see Cox, Jane Buck, “No Tragedy of the Commons,” Environmental Ethics 7 (1985): 5355CrossRefGoogle Scholar.

35 Ellickson, Robert C., “Property in Land,” Yale Law Journal 102 (1993): 1388CrossRefGoogle Scholar.

36 Robert Ellickson writes: “Most economic historians regard the open-field system as an efficient institution during its prime in the high Middle Ages. Medieval farmers, recognizing that efficient boundary locations varied, devised a clever way to change land boundaries on a seasonal basis. The agricultural activities for which there were efficiencies of scale—harvesting, fencing, shepherding—were performed jointly on commonly accessible land according to explicit bylaw or implicit contract (‘the custom of the manor’). The small agricultural events that lacked returns to scale—planting, weeding, thinning—were stimulated through the direct material incentives of private land ownership.” Ibid., 1391.

37 Rose, Carol, “The Comedy of the Commons: Custom, Commerce, and Inherently Public Property,” University of Chicago Law Review 53 (1986): 744CrossRefGoogle Scholar.

38 Carol Rose notes that many theorists believe that there is a “natural history of property rights when resources are growing scarcer: a stage 1 of plenty, where any given resource is unowned, unmanaged, and open to all; a stage 2, where the resource is less plentiful and is appropriated by a group and subjected to somewhat diffuse common-property arrangements, often customary; and a final stage 3, in which the resource is scarce enough to be subject to full-blown individualized property rights.” Rose, Carol, “Energy and Efficiency in the Realignment of Common Law Water Rights,” in Rose, Carol, Property and Persuasion (Boulder, CO: Westview Press, 1994), 164Google Scholar. Rose points out, however, that property rights do not necessarily evolve in this order, arguing persuasively that the process can stop at stage 2, and that stage 2 and stage 3 can often be reversed. Her point, which I believe to be correct, is that common law evolution tends to find the most apt solution in the particular circumstances, whether this fits scholars' theoretical models or not.

39 Rose, “The Comedy of the Commons,” 745.

40 See Rose, “Energy and Efficiency,” 163.

41 For a fuller account of the development of water rights in the western United States, see Anderson, Terry and Hill, P. J., “The Evolution of Property Rights: A Study of the American West,” Journal of Law and Economics 18, no. 1 (1975): 177–78CrossRefGoogle Scholar.

42 See Submerged Lands Act of 1953, 43 U.S.C.A. secs. 1301–1315 (West 2007).

43 For purposes of concision, the term ‘legislation’ is being used to encompass regulations issued by administrative agencies.

44 Radio Act of 1927, 47 U.S.C.A. sec. 83 et seq., repealed by ch. 652, sec. 602(a), 48 Stat. 1102 (West 2007).

45 See Definition of Waters of the United States, 40 C.F.R. 230.3 (2006).

46 16 U.S.C. secs. 1531–1544 (2007).

47 See Restatement (Second) of Torts, sec. 158 (2000).

48 See Restatement (Second) of Torts, sec. 821D (2000).

49 When a polluter exploits a commons in a way likely to cause an unreasonable level of harm to the land of another, the landowner may obtain an injunction to terminate the activity. See Keeton, W. Page et al. , Prosser and Keeton on Torts, 5th ed. (St. Paul, MN: West Publishing Company, 1984), 631Google Scholar.

50 See, e.g., Sammons v. City of Gloversville, 175 N.Y. 346 (1903); Whalen v. Union Bag and Paper Co., 208 N.Y. 1 (1913).

51 See, e.g., Boomer v. Atlantic Cement Co., 257 N.E. 2d 870 (1970). It has been suggested that the continued development of such common law environmental causes of action could provide most of the environmental protection now afforded by federal environmental law. See Green, H. Marlow, “Common Law, Property Rights, and the Environment: A Comparative Analysis of Historical Developments in the United States and England and a Model for the Future,” Cornell International Law Journal 30 (1997): 541Google Scholar.

52 Pub. L. No. 101-549, 104 Stat. 2399 (1990).

53 What would such lawsuits look like? How can there be a lawsuit when those whose property has been damaged do not know which polluter to hold responsible? But the common law has encountered this problem before and has already evolved a response to it: market share liability. In cases in which the plaintiff has been damaged by a product produced by several manufacturers, but cannot identify the particular manufacturer who caused his or her injury, the plaintiff may join all available manufacturers as defendants. As long as the defendants constitute a substantial share of the market for the offending product, the plaintiff can recover damages from each defendant in proportion to the defendant's share of the market for the product at the relevant time. See Sindell v. Abbott Laboratories, 26 Cal. 3d 588 (1980).

What if an individual property owner's damage is too slight to make it worthwhile to pursue a law suit? But the common law has encountered this problem before and has already evolved a response to it: the class action lawsuit that allows the joinder of many small claims of damage presenting essentially the same factual issues into one suit.

Won't polluters merely regard lawsuits as a cost of doing business to be absorbed, and continue with their polluting activities? Perhaps, but the common law has encountered this problem before and has already evolved a response to it: the injunction. In trespass and nuisance suits, a plaintiff can sue not merely for damages, but for an injunction that orders the defendant to refrain from the activity that is causing the plaintiff's injury.

The essential characteristic of the common law is that it learns. At any point in time, there are interpersonal wrongs that it does not adequately address. But it is precisely these inadequacies that spur the legal innovations that produce new procedures and remedies. I can describe how the common law would be likely to handle lawsuits over acid rain because the problems that beset such suits are similar to those that have arisen and been resolved in the past. I cannot, however, predict how the common law will address novel environmental problems that present entirely new challenges. This is precisely the reason for advocating common law environmental regulation: to learn how to align private incentives with the preservation of resources that are not easily reduced to physical possession.

54 See United States v. Knott, 106 F. Supp. 2d 174, 180 (D. Mass. 2000).

55 See McLean, Iain, Public Choice: An Introduction (Oxford and New York: Basil Blackwell, 1987), 7176Google Scholar.

56 The Washington Post reports that “a study published in Science magazine Feb. 29 concluded that greenhouse-gas emissions from corn and even cellulosic ethanol ‘exceed or match those from fossil fuels and therefore produce no greenhouse benefits.’ By encouraging an expansion of acreage, the study added, the use of U.S. cropland for ethanol could make climate conditions dramatically worse. And the runoff from increased use of fertilizers on expanded acreage would compound damage to waterways all the way to the Gulf of Mexico.” Mufson, Steven, “Siphoning Off Corn to Fuel Our Cars,” Washington Post, April 30, 2008, at A8Google Scholar.

57 The information on which this illustration is based is taken from the PBS science show Nova: The Kingdom of the Seahorse, broadcast on April 15, 1997.

58 This arrangement has much in common with the medieval common field system of agriculture and is a good example of Carol Rose's second stage in the evolution of private property, in which “the resource is less plentiful and is appropriated by a group and subjected to somewhat diffuse common-property arrangements, often customary.” Rose, “Energy and Efficiency,” 164. See note 38 above.

59 16 U.S.C. sec. 1532(19).

60 50 C.F.R. sec. 17.3 (1994).

61 Kaufman, Marc, “Increased Demand for Ivory Threatens Elephant Survival,” Washington Post, February 27, 2007, at A10Google Scholar.

62 Polasky, Stephen and Doremus, Holly, “When the Truth Hurts: Endangered Species Policy on Private Land with Imperfect Information,” Journal of Environmental Economics and Management 35 (1998): 42CrossRefGoogle Scholar.

63 See Lueck, Dean and Michael, Jeffrey A., “Preemptive Habitat Destruction under the Endangered Species Act,” Journal of Law and Economics 46 (2003): 27CrossRefGoogle Scholar. See also Adler, Jonathan H., “Money or Nothing: The Adverse Environmental Consequences of Uncompensated Land Use Controls,” Boston College Law Review 49 (2008): 319–32Google Scholar.

64 See Wilcove, David S. et al. , “Quantifying Threats to Imperiled Species in the United States,” Bioscience 48 (1998): 607CrossRefGoogle Scholar.

65 The account of the Cayman Turtle Farm is taken from Smith, Robert J., “Private Solutions to Conservation Problems,” in Cowen, , ed., The Theory of Market Failure: A Critical Examination, 341–60Google Scholar.

66 See Adler, , “Money or Nothing,” 335. See also Joe Kerkvliet and Christian Langpap, “Learning from Endangered and Threatened Species Recovery Programs: A Case Study Using U.S. Endangered Species Act Recovery Scores,” Ecological Economics 63 (2007): 500Google Scholar; and Sugg, Ike C., “Caught in the Act: Evaluating the Endangered Species Act, Its Effects on Man, and Prospects for Reform,” Cumberland Law Review 24 (1993): 4244Google Scholar.

67 See U.S. Fish and Wildlife Service Web site, http://ecos.fws.gov/tess_public/pub/DelistingReport.jsp.

68 Nova: The Kingdom of the Seahorse, PBS television broadcast, April 15, 1997.