Economic Scene: In the Defense of Visual Pollution

Article excerpt

All around the country, conflicts are brewing over aesthetics. Instead of tolerating sights they don't like -- from tacky porch furniture to innovative architecture -- more and more Americans are demanding a world free of "visual pollution." Appearance is getting the sort of regulatory scrutiny once reserved for public health and safety.

In Portland, Ore., you can no longer build a home whose front is less than 15 percent windows and doors or whose garage takes up more than half the facade. The goal, a local official suggested in response to critics, is to "put a stop to the ugly and stupid houses that we see going up."

New York City is trying to revise its land use code for the first time since 1961.

The proposed Uniform Bulk Program would establish a design review committee and use height limits to preserve the skyline. The new rules don't claim to be healthful or to preserve historic buildings. They're all about looks.

"Everything proposed by the Uniform Bulk Program is entirely a matter of taste," wrote Herbert Muschamp, the architecture critic for The New York Times.

Suburbanites now take offense at their neighbors' paint colors, their window frames, even their backyard swing sets. And just about everywhere, residents are fighting new cell phone towers, which can block views or just look ugly.

The push to expand the definition of "pollution" to include aesthetic offenses forces us to re-examine why and how we regulate the spillovers that economists call externalities. Should we really ban, tax or otherwise deter any action that has unpleasant effects on other people?

After all, just about everything people do in society has spillover effects, many of them unwanted.

Ronald Coase of the University of Chicago addressed these questions in 1960, in The Problem of Social Cost, an article that helped win him the 1991 Nobel Prize in economics. But the most relevant parts of that paper are the least noted.

The paper is most famous for what was later called the Coase Theorem.

This is the idea that if making deals in the marketplace costs nothing, it won't matter how the law assigns liability.

If a factory has the right to operate even if it pollutes, then people who don't want to breathe stinky air can pay the owner not to pollute.

If, on the other hand, the neighbors have the right not to suffer pollution, the factory can pay them to waive that right. In either case, a deal will be made at the level that makes everyone as happy as possible.

But as Coase would be the first to point out, we don't live in a world where deals are free. Gathering information, rounding up all the affected parties, negotiating contracts, monitoring pollution levels and so on are all costly.

These transaction costs can make such happy deals difficult, though certainly not impossible.

In the real world, the way rights are assigned -- to polluters or to their neighbors -- does matter. That makes it important to assign them correctly.

What principles should we use to get the best result?

Coase's first insight is that pollution is not a simple matter of physical invasion or evildoing. It is a byproduct of valuable actions.

Preventing those actions would also be harmful. …