Hypothesis: the problem of nuisance remedies is hard because it reduces to the economic calculation problem. (The Coasean “solution” works by exploiting the one known solution to the economic calculation problem, the market solution.)
Questions:
– Is this too obvious from the definitions of the terms? Sometimes I can’t tell whether what I’m saying is interesting or dead obvious.
– Is this true beyond nuisance? Maybe it really applies to all torts or more broadly; I haven’t had a chance to work that out.
Maybe you should define your terms for people who don’t know what you’re talking about.
Unless I’m mistaken, the economic calculation problem is basically that to figure out the optimal distribution of goods you need to receive and compute vast amounts of information. Since this is very difficult, the notion is that we’re best off relying on prices to send signals. De-centralized, price-based decision making is supposed to be superior to anything, say, a judge could do.
Nuisance remedies would just be whatever the court orders the offending party to do to redress the nuisance. So for instance, sometimes the judge will issue an injunction to shut the nuisance down (the injunction will be a right held by the plaintiff, so the defendant can pay to keep the injunction from being enforced). Other times the judge might order money damages.
So I take it what Dave is saying is that the nuisance remedy is probably outcome-determinative – the judge is essentially deciding whether society is better off with a polluting cement factory or without one. Sometimes the judge punts to the market (in the sense of assigning a right and letting the parties bargain over it), in apparent recognition of the economic calculation problem.
I think this is true and non-obvious. However, I’m not as enamored of the economic calculation problem as Dave seems to be. Partly I think it’s a gee-whiz kind of observation, but mostly I think it’s exaggerated. Hayek used the argument as an attack on state planning, and while I think it’s a decent argument I imagine he’d be surprised at the prosperity that has flourished in the presence of intrusive state regulation.
“I imagine he’d be surprised at the prosperity that has flourished in the presence of intrusive state regulation.”
Not an argument for intrusive state regulation. That’s like saying, I strapped cinder blocks to your ass and you still made it outside, so clearly those blocks are not a hindrance to your movement.
No one is trying to make an argument for intrusive state regulation.