Theorem stating that market forces will dictate that the use of property will be its most efficient use regardless of the law
Tells judges to ignore issues of efficiency = doesn’t want judges to worry about what is most economically efficient thing because economy can take care of itself
Judges are to ignore considerations of economy and social utility unless someone can identify costs that will prevent the economy from taking care of itself
Commentators use this theorem to argue that the courts should allow market to determine use of property and should not interfere through nuisance decisions
Efficiency argument = if nuisance is in industrial part of country and nuisance helps business, courts may be reluctant to enjoin nuisance (Rose v. Socony-Vacuum Corp.)
Way to think about the efficient result is to ask what a single person seeking to maximize their house would do if confronted with the question
Instead of focusing on efficiency, judges could be interested in doing justice (Nelson)
Conservative positions (those who are adherents to the free market and against redistribution of wealth) on the use of the coase theorem:
Argue that free market will take care of itself and judges shouldn’t interfere. When actors make money acting in the free market judges shouldn’t redistribute.
When there are transaction costs, judges should attempt to achieve the result that the market would achieve and let profits go to those who’d normally get them
Liberal (those who are concerned about more egalitarian distribution of wealth:
Argue we should let the market take care of itself and take the money the market produces and redistribute it to underdogs
If there are transaction costs judges should do what the market would do without those costs then try and distribute the money
Rose v. Socony-Vacuum Corp. (1934) – Rose is a farmer whose water is contaminated by oil refinery. Court says Rose has no remedy.
Policy decision = favours oil over other use, unavoidable accident of growth of population/industry such that individual rights have to be surrendered for the benefit of the community as it develops and expands.
Stevens v. Rockport Granite Co. (1914) – where granite quarry and residential homes have long co-existed court limits quarry's operation of machinery, since the quarry can't suddenly change character of the neighborhood by introducing noisy machines
most courts will hold opening of new funeral home to be nuisance, due to decline in property value and emotional discomfort
About justice = people moved into neighborhood with reasonable expectation it would remain a certain way and court wants to honor that
Nicholson v. Connecticut Half-Way House, Inc. (1966) – Property owner wants to convert house into half-way house for people released on parole. Court holds that the property owner’s proposed use as a half-way house is reasonable, and no specific evidence that property values will go down or that there will be harm
fears of neighbors based purely on speculation can’t justify injunction
Alevizos v. Metropolitan Airports Commission (1974) – Residents of neighbourhood near airport bring nuisance claim because of noise of jets. Court says that landowners have right to compensation if the noise from the airport caused a decrease in the market value of their property
Differences in cases = both the funeral home and the airlines are profit making, whereas the half-way house was not
Boomer v. Atlantic Cement Co. (1970) – Cement company found to be a nuisance. But economic value of company greater than the nuisance caused to neighbors. Company can stay but neighbors get compensation for having to live with nuisance
Court takes economic issues into account when determining a just outcome
Pendoley v. Ferreira (1963) – Piggery was established for years but town expanded and neighbors got closer stench, flies and health risk = nuisance. Piggery has to close down and gets no compensation.
Why no compensation? Development just happened and there was no one person who created the situation (unlike Dell Webb), pig farmers can sell their land to a developer for a huge profit
Spur Industries, Inc. v. Del E. Webb Development Co. (1972) – Webb bought land near cattle feed company and built housing development. Dell sought to get the cattle company enjoined as nuisance because of smell. Court said that since Dell voluntarily “came to the nuisance” since it existed before he was not completely innocent and Dell was responsible for paying costs of moving etc.