I hope you don’t mind me putting this on my blog because I think that this discussion is very much needed among libertarians. I don’t think it will get enough discussion though.
When I was first introduced to anarcho-capitalism (or rather, when I started identifying as one) I found this to be a very convincing argument. I read into the Coase Theorem and I was (and still am) impressed by its market-oriented implications on how to take care of the environment.
However, there are a few problems (that my friend Sam pointed out to me over dinner one night) that need to be addressed:
- Air pollution around your house is good and all, but how can you pinpoint who is violating your rights?
- Similarly, water run-off (containing chemicals used in agriculture) are hard to pinpoint when every farmer uses the same chemicals.
Ronald Coase said that easily divisible property rights with little transaction costs would be a good way to deal with externalities. This idea was used to help establish radio stations using different radio waves
However, when applied to the real world, we have tons of transaction costs and not-so-easily divisible property rights.
Obviously it’s easy to say “if this guy pollutes my air/water, I can sue him.” However, proving that in court is ridiculously hard as it is, on top of the fact that (depending on the state and/or arbitration service) comparative negligence would need to be adopted in this situation.
Yoram Bauman (the “Stand-up Economist”) who is a comedian and an environmental economist (he does economics jokes, they’re actually really funny) noted in a video (which I can’t find) that everyone pollutes and thus, because of that, everyone suffers. His solution, however, is taxes.
What we can take from this idea that “everyone suffers” is that you can’t pinpoint who is really polluting you the most. Thus, your case in court would be thrown out or you would lose it because you can’t convince a jury that the Oil Company polluted you over your own damn car.
So this is the problem of the Coase Theorem. As I’ve stated, hydraulic fracking is a great place to test the Coase Theorem as property rights are easily divisible and there are only a few companies that are possible polluters.
There is, of course, the problem of “just because you’re willing to take an extra $10,000 a year from a big oil company is no justification for him polluting on your ground” because that could lead to pollution to other people and so on and so on. Don’t forget global warming and other environmental problems associated with fossil fuels and other pollutants.
(Who would’ve cleaned up the BP oil spill in the Gulf if it we were in an ancap utopia? The people? Surely they would, but is that fair? You can’t claim ownership to the fish they killed, can you? No one can force BP to clean up something if there is no claim to property. In fact, BP could claim the area they polluted under “homesteading” principles.)
If you’re looking at this from a Coasian perspective (as I am right now), all I see are transaction costs on top of transaction costs on top of transaction costs.
So when Coase said “no transaction costs” and all we see are “transaction costs on transaction costs on transaction costs”, do we really have a “Coasian” solution to our problems?
My conclusion: no.
