A fellow blogger has been on my case about posting something interesting. However, essay season is upon us, so HERE IS A LITTLE EXCERPT FROM A FIRST DRAFT; I cannot speak to the grammar or the veracity of what is contained herein, nor can I assure you that it is interesting. N.B. If this post seems somewhat reminiscent S. Elgie's brilliant article, it is because my paper will go on to criticize it (hopefully with some merit).
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To understand the ends at which an
environmental tort judgement is aimed, one must first understand the
function of ascribing a monetary value to the harm that a
tortfeasor has occasioned. In principle, a judgement functions to place the
full social cost on the entity that caused the damages in question.
Applied in an environmental context, this is known as the polluter
pays principle. Indeed, as ____ Ashford asserts, the “polluter
pays principle incorporates a moral judgement by placing
responsiblity for cessation of pollution (and for any necessary
clean-up) on the polluter.”
A judgement, in effect, internalizes an economic agent's social
costs.
The
concept of a social costs originates with the economist Arthur Pigou.
Although his classic work Wealth and Welfare
identified the differences between social and private costs – the
former being borne by society and the latter being borne monetarily
by a given economic agent – Pigou did not extend his reasoning to
tort law; instead, he confined his reasoning to taxation.
R. Posner, however, notes there Pigou's idea, namely a Pigouvian
tax, forms the direct antecedent to the modern economic approach to
tort law.
As
with the SCC's decision in BC
v. Canfor,
the economic goal of tort law is to correct for these market
externalities. Generally, an externality is a social cost that is
not captured in a market transaction.
Stagl has written that “[m]any of the thing individuals care about
[...] are not traded in markets [...] missing markets are very common
in regard to the services that the environment provides to economic
activity.”
In the BC v.
Canfor decision,
for example, some of the costs not captured by market prices would
include the biodiversity lost as trees are cut, the trees' function
as a carbon sink, and diminution in the quality of the watershed.
Often times, aspects of economic exchanges are not priced and
captured within the market – these are a market failures.
As Nobel Laureate Joseph Stiglitz notes, market economies and
centrally planned economies have both historically had great trouble
dealing with these externalities.
How,
then, does a Pigouvian tax (namely, in this case, a tort judgement)
function to correct a market externality? Where a cost is not
captured in a market, it has a non-market valuation: there exists a
latent curve that perhaps “can be teased out through other means.”
As the graph above demonstrates, there is a gap between marginal
private cost (MPC) and marginal social cost (MSC). This is known as
a marginal external cost – the price of an externality.
In the absence of a price for environmentally deleterious behavior,
the market will yield an output were the supply and demand curves
intersect. However, once a tort suit or tax is in place, the cost of
environmental degradation now exists for the producer, shifting the
marginal private cost (MPC) up to the marginal social cost (MSC), at
least if the tax or tort suit were priced correctly such that the
cost to the producer accurately reflects the true social cost of the
activity – this was the goal of the majority in BC
v. Canfor.
Indeed, accurately gauging the marginal external cost of an
environmentally deleterious act is the mark at which an economist
would aim.
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