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A critical view on liability rules in theory and practice : the Belgian case

Published online by Cambridge University Press:  17 August 2016

Suzan Boll-De Kock
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Extract

This paper is concerned with the relationship between economic theory and legal order in environmental problems. In dealing with pollution externalities, the most divergent viewpoints about the effects of liability rules on the process of adjustment to an optimal allocation of economic resources have been defended in recent economic literature. The main cause of these deviating conclusions is the sometimes explicitly stated, but mostly implied, assumption concerning the possibility of bargaining between the parties involved. In this article we share the view of the authors who state that bargaining for environmental externalities is impossible.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 42 , Issue 1 , March 1976 , pp. 23 - 36
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1976 

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Footnotes

*

I have benefited substantially from a report by an anonymous referee and from comments by W. Desaeyere, P. Van Rompuy and other members of the Workshop Regional Economics at the K.U. Leuven. I am also indebted to D. Soetemans for providing me with some legal information.

References

(1) Coase, R., “ The Problem of Social Cost”, Journal ofLaw and Economics, October 1960, pp. 1–44.Google Scholar

(2) Because of the requirement that these conditions should simultaneoulsy be satisfied, the results obtained by this group of economists lose much of their power in the face of real world problems.

(3) See Dolbear, F.T. Jr., « On the Theory of Optimum Externality», American Economic Review, 1967, pp. 90–103;Google Scholar Mishan, E.J., « On the Theory of Optimum Externality : Comment», American Economic Review, 1968, pp. 523–527;Google Scholar Pauly, M.V., « On the Theory of Optimum Externality : Comment», American Economic Review, 1968, pp. 528–529 Google Scholar; Dolbear, F.T., «On the Theory of Optimum Externality : Reply», American Economic Review, 1968, pp. 529–531.Google Scholar

(4) See Burrows, P., « On External Costs and the Visible Arm of the Law, Oxford Economic Papers, March 1970, pp. 39–56.CrossRefGoogle Scholar

(5) See Marchand, J.R. and Russel, K.P., « Externalities, Liability, Separability, and Resource Allocation », American Economic Review, 1973, pp. 611–620.Google Scholar

(6) Some writers did criticize Coase. More specifically, they accepted his conclusion for the short run, but doubted its validity in the long run. See : Calabresi, G., « The Decision for Accidents : An Approach to Nonfault Allocation of Costs », 78, Harvard Law Review, 713, 730,1965;Google Scholar and Mohring, H. and Boyd, J.H., «Analysing Externalities : " Direct Interaction vs. Asset, Utilization Frameworks», Económica, 1971, pp. 347–361.Google Scholar More recent articles have rightly refuted these criticisms. See : Calabresi, G., « Transaction Coste, Resource Allocation and Liability Rules. A Comment », Journal of Law and Economics, vol. 11, April 1968, pp. 67–73;CrossRefGoogle Scholar Nutter, G.W., « The Coase Theorem on Social Cost ; A Footnote », Journal of Law and Economics, vol. 11, Oct. 1968, pp. 503–507;CrossRefGoogle Scholar Demsetz, H., « When does the Rule of Liability matter? », Journal of Legal Studies, vol. 1, 1972, pp. 13–28,CrossRefGoogle Scholar and Gould, J.R., « Mohring and Boyd's Objection to the Coase Theorem : A note », Económica, May 1975, pp. 203–206.Google Scholar

(7) See Buchanan, J.M. and Stubblebine, W.C., « Externality », Económica, 1962, pp. 371–384 Google Scholar and Turvey, R., « On Divergencies between Social Cost and Private Cost », Económica, 1963, p. 311 Google Scholar. However, this conclusion is the result of a strange way of reasoning, which can hardly be accepted. We explain. If there is room for a voluntary agreement between the parties, taxing the polluter is superfluous and inappropriate. The compensation payment is then needed only to neutralize the effect of the tax on the relative bargaining positions of both parties, in order to remove the possibilities of posttax trade. In the same analysis one cannot first impose taxes, which implies that one assumes that bargaining is impossible, and then, without comment, posit the reverse, that is, consider the possibility that there will be directly negotiated. It is possible that the introduction of government intervention itself awakens concerns about the true effects of the environmental interdependencies and as a result induces negotiations. But if this is the case, it must be explicitly stated. See Shibata, H., « Pareto-Optimality, Trade and the Pigovian Tax », Economica, May 1972, pp. 198–199.Google Scholar

(8) At least not for large number cases. Even for the small number cases, one has no evidence on the disputes which have been settled by bargaining.

(9) We owe this point to the referee. It is also remarked by Calabresi, G., op. cit., 1968, p. 67.Google Scholar

(10) See Baumol, W.J., « On Taxation and the Control of Externalities », American Economic Review, 1972, pp. 307–322;Google Scholar Baumol, W.J. and Oates, W.E., The Theory of Environmental Policy, Prentice Hall, Inc. 1975, pp. 24–26, 40–42,Google Scholar and Kraus, M. and Mohring, H., « The Role of Pollutee Taxes in Externality Problems », Economica, May 1975.CrossRefGoogle Scholar

(11) Coase, R., op. cit., p. 42.Google Scholar

(12) Baumol, WJ. and Oates, W.E., op. cit., pp. 31–32 (Italics mine).Google Scholar

(13) I owe this point to the referee.

  1. (14)

    (14) In the civil code (Burgerlijk Wetboek, Marabo, Gérard & Co, Verviers, Belgium, 1969), we find the following definition of article 1382 and 544 :

  2. — article 1382 : « Tout fait quelconque de l’homme, qui cause à autrui un dommage oblige celui par la faute duquel il est arrivé, à le réparer » (p. 259)

  3. — article 544 : « La propriété est le droit de jouir et disposer des choses de la manière la plus absolue, pourvu qu’on n’en fasse pas un usage prohibé par les lois ou par les règlements » (p. 118).

  4. For current interpretations, see : De Page-Dekkers, Traité Elémentaire de Droit Civil Belge, V. 1952, nr. 913, B and 918 and K. Calcq, Traité de la Responsabilité Civil, I, 1967, nr. 647.

(15) For analytical convenience we assume a constant and linear relationship between pollution and marginal damages.

(16) As has been noted already, distributional aims can, at least at a formal level, be satisfied independently of economic objectives. Therefore, they should not bother us too much.

(17) In economics these ethical values are usually called value judgments. Little defines a value judgment as « any persuavive statement ». See his A Critique of Welfare Economics, 2nd ed., Oxford, 1957. For an illuminating exposition of the relation between value judgments and welfare economics, see the introduction of Nath, S.K., A Reappraisal of Welfare Economics, Routledge & Kegan Paul, London, 1969, pp. 1–5.Google Scholar

(18) Coase, R., op. cit., p. 43.Google Scholar

(19) Coase, R., op. cit., p. 9.Google Scholar

(20) See McKean, R.N., « The Use of Shadow Prices », in Layard, R. (ed.), Cost Benefit Analysis, Penguin Modern Economic Readings, 1972, p. 134.Google Scholar

(21) See, « Burgerlijke Rechtbank te Luik », June 7th, 1966, Journal des Tribunaux. 1967, column 484 ; « Hof van Beroep te Brussel », March 13th, 1967, Revue Générale des Assu-rances et des Responsabilités, 1969, column 8154. In the case of a too noisy nightclub, the judge considered as a fault the fact that the barkeeper did not sufficiently isolate the building. See : « Rechtbank te Leuven », January 14th, 1970, Rechlkundig Weekblad, 1970–71, column 430.

(22) See Derine, R., « Overzicht van Rechtspraak 1961–64, Zakenrecht », Tijdschrift voor Privaatrechl, 1965, from n° 18 onwards.Google Scholar

(23) See « Hof van Beroep te Brussel », December 2nd, 1966, Rechtkundig Weekblad, 1966–67, column 1530 ; « Handelsrechtbank te Doornik », December 2nd, 1952, Revue Générale des Responsabilités, 1953 ; column 5126.

(24) See Suetens, L.P., « Noot », Rechtkundig Weekblad, September 3th, 1972, p. 780.Google Scholar

(25) See « Hof van Beroep te Brussel », December 2nd, 1965, op. cit.

(26) See Vandenberghe, H., « Recht en Lawaai. Maatregelen ter bestrijding van de Ge-luidshinder », Rechtkundig Weekblad, 1967–68, column 1712;Google Scholar « Correctionele Rechtbank te Hasselt », April 18th, 1972, Rechtkundig Weekblad, 1972–73, column 775, with note by L.P. Suetens.

(27) Most of the legal measures are merely general principles and need enforcement decisions (in Belgium : royal decrees) to be applicable. Till now, only a few such royal decrees have been issued.

(28) See Suetens, L.P., « Le Rôle de l'Administration en Matière d’Environnement »,Google Scholar Extrait des Rapports Belges au 9e Congrès International de Droit Comparé, Téhéran, 27 sept. - 4 oct., 1974, Bruxelles, C.I.D.C., 1974.

(29) See « Raad van State », April 10th, 1965, arrest n° 10.548 ; « April 19th, 1971 », arrest n° 14.675.

(30) See Matthijs, J., « La Protection Pénale de l’Environnement,, l’eau, l’air, le bruit », Revue de Droit Pénal et de Criminologie, 1971–72, pp. 519–563.Google Scholar