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.1 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.”2 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.3 R. Posner, however, notes there Pigou's idea, namely a Pigouvian tax, forms the direct antecedent to the modern economic approach to tort law.4
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.5 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.”6 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.7 As Nobel Laureate Joseph Stiglitz notes, market economies and centrally planned economies have both historically had great trouble dealing with these externalities.8
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.”9 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.10 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.11
1Calabresi, 505
2Ashford, 175
3Landes and Posner, p. 6
4Landes and Posner, p. 6
5Ashford 130
6Stagl, p.322
7Davidson 100
8Stiglitz, 517
9hanemann, 38
10Stagl, p. 329
11Stagl, 329



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