Viewing the Cathedral from Behind the Color Line: Property Rules, Liability Rules and Environmental Racism

Abstract

For more than twenty-five years, property scholars have been applying the theorem developed by Ronald Coase and systematized in the now-classic law review article, Property Rules, Liability Rules and Inalienability: One View of the Cathedral, by Guido Calabresi and A. Douglas Melamed. More recently, property theorists and proponents of behavioral law and economics have begun to challenge the assumptions stemming from Coase, Calabresi and Melamed and to develop alternative accounts of nuisance and takings theory. This literature has entirely sidestepped, however, the role of race and poverty in the location of polluting industries. Using the story of Waterfront South, a segregated, environmentally beleaguered community in Camden, New Jersey, I explore the historical role of government in creating racially segregated and polluted inner cities. This article's unique contribution is to fashion a remedy to common law nuisance claims that: (1) forces polluters to internalize the harmful effects of their actions, (2) responds to the market distortion in property value caused by the long history of racism; and most importantly, (3) optimizes the utility of residents.

According to what I call a Residents' Choice Rule, courts should pre-set a damages award at the replacement cost of each residents' home in a nearby non-segregated community, and allow the residents to choose either injunctive relief or damages by majority vote. Building upon insights from cognitive decision theory, this hybrid rule allows residents of the community to decide whether they would be better off with a damages remedy or an injunction and minimizes the externally constructed impediments to their decision-making. The rule also has implications for takings jurisprudence because I contend that when the government exercises its power of eminent domain in segregated and underserved communities, compensation should be adjusted to reflect the devaluation caused by systematic racism.

Keywords: coase theorum, nuisance, property rules, liability rules, race, environmental justice, civil rights