Emerging Issues in Management (Mgmt 440)

1. Emerging Issues in Management (Mgmt 440) Environmental Management and Sustainability (Chapter 11) Professor Charles H. Smith Fall 2011

2. Introduction • The subjects of environmental management and sustainability are complex and have many ethical, legal, political and other issues. • We will concentrate our discussion of these issues around two concepts • Common law theory of nuisance which attempts to balance the interests of the polluter, the victim, and the community at large. • Coase Theorem (see pages 340 et seq.)which can be applied to environmental issues such as the right to pollute vs. the right to be free from pollution.

3. Types of Pollution • Air pollution – mobile and stationary sources expel pollutants into the air, making breathing, sight and even life difficult; e.g., motor vehicles, factories. • Water pollution – industrial, governmental and agricultural sources; e.g., organic waste, soil runoff, heated water, nutrients such as detergents, fertilizers and human/animal waste, toxic and other hazardous materials. • Noise pollution – loud and otherwise annoying noise; e.g., party music, motor vehicles, manufacturing, barking dog. • Soil pollution/contamination – e.g., toxic and other hazardous materials such as petroleum products. • All types of pollution regulated by federal, state and/or local statutes, which can lead to “anti-business” accusations against city, county, state or country.

4. Nuisance • Nuisance occurs when landowner uses property in manner that unreasonably interferes with others’ rights to use or enjoy their own property. • Court may balance plaintiff’s harm caused by interference with property rights with harm to defendant and the community if required to stop activity causing the nuisance in order to decide whether the activity is wrongful; e.g., interests of residents who live near airport to be protected from noise and other pollution vs. benefits gained from airport. • Private nuisance – when plaintiff suffers distinct harm that is unique to plaintiff or separate from harm affecting others. • Public nuisance – when multiple victims suffer same or similar harm due to nuisance.

5. Nuisance cont. • Nuisance is a common law theory but now most commonly shown by violation of statute; examples include • Business’ violation of federal and state regulations as to waste disposal and storage. • Neighbor’s barking dog which is regulated by city ordinance. • Landscaping or loud music violates city ordinance as to volume and/or time. • Student examples.

6. Nuisance cont. • Zoning laws are relevant in determining whether a nuisance has occurred. • Zoning laws designate the permitted use(s) for land; e.g., single family or multi-unit residence, commercial, industrial, etc. • Use of land in compliance with zoning laws can eliminate any claim of nuisance.

7. Nuisance cont. • What can the plaintiff win in a nuisance case? • Legal and equitable remedies are available • Damages for harm caused in the past (though financial loss may occur in the past, in the future, or both) • Special damages. • General damages. • Punitive damages. • Injunction to prevent more of the same harm in the future. • Plaintiff may be entitled to damages, an injunction, or both depending on the circumstances.

8. Coase Theorem Defined • Text at page 341 – “[I]n the absence of transactions costs [impediments to bargaining] over . . . private agreements, the socially efficient outcome can be realized if the entitlement [property or other legal right] is assigned to either party.”

9. Coase Theorem Defined cont. • Professor Tim Haab of Ohio State University provides four versions of the Coase Theorem (http://www.env-econ.net/2006/01/what_is_the_coa.html); here are the first two • Free-market version – “As long as both parties are free to bargain, the final amount of pollution will be independent of the initial allocation of property rights.” • “In the presence of transactions costs, the final amount of pollution depends on the initial allocation of property rights.”

10. Coase Theorem Defined cont. • Here are Dr. Haab’s other two versions • Wealth effects version – “[T]he bargaining outcome creates wealth for the owner of the property right.” • Free entry version – “[T]he increase in profits from selling the property right might lead others to want to take advantage.”

11. Illustrations of the Coase Theorem • Professor Thayer Watkins of San Jose State University provides an instructive illustration of the Coase Theorem at http://www.sjsu.edu/faculty/watkins/coasetheorem.htm which we can use for class discussion. • See also “The Coase Theorem” on pages 342-43.