Some economic problems are the same, regardless of scale. That is true right now in my neighborhood of St. Anthony Park, where someone is developing a long-unused lot and cutting down a couple dozen mature trees that had been there for decades. The tract covers only a few thousand square feet, but the activity there raises the same economic issues as it does in millions of square miles of tropical rain forest in countries like Brazil and Zaire.
Economists across all political and ideological lines agree that well-defined property rights are essential to economic efficiency. People making decisions need some degree of certainty about what they can and cannot do with the productive resources they own. So the legal systems of nearly all countries give considerable latitude to the owners of property, including land. These usually include the right of free use for one’s personal benefit, and rights to alter, rent, sell or bequeath to heirs.
But in all systems, there are limitations, the principal one being that any use may not harm others. Economists call such collateral harms “external costs.” If you use your property in a way that benefits you but hurts your neighbors, there are limits. And there comes the rub.
In practical terms, it is impossible to live on and/or own modern city lots without inevitably doing something that makes a neighbor less well off. Smoke from my barbecuing ribs is a stink to my neighbor. The rap music her son plays from his boom box as he paints the wall across from my kitchen window grates on my ears. If the manure I heap around my rhubarb really isn’t “well-rotted,” the odor can nauseate those next door. A gas station adjacent to houses that does car repair in the evenings will anger many if a mechanic uses an air wrench on a particularly recalcitrant lug nut after 10 p.m.
Thus we have zoning codes and noise and other nuisance ordinances. These restrict the autonomy of owners to use their property as they might wish.
However, not all “external effects” of property use are negative ones that come at the cost of someone else. There can be positive benefits. My neighbors keep up their lilacs and the scent drifting into our kitchen window is pleasant to us. The motion-activated light the neighbor installed makes it safer for us to get out of our car at night. My big oaks pleasantly shade the neighbor’s lawn when they have a party in the back, although these same oaks also drop dead branches and leaves for them to clean up. A seminary has a large tract of grassland that neighbors can and do use as if it were a public park. Someone bought a double lot in 1880 but built a house on only half, holding the other as an investment. For decades, the neighbors on the next lot can look at trees and shrubs rather than the wall of another house only feet away. And patrons of a little food co-op can park their cars under a leafy arbor of big trees when some owner leaves her commercial lot undeveloped for ages.
And these positive residual effects often are not just “nonmonetary amenities.” Nearby green spaces increase property values. If you own a house across the street from the seminary’s well-kept open acres, your property has a higher market value than one where the owner must walk five blocks to reach even a small public park. Ditto if your lot is adjacent to one never built on that is now full of beautiful oaks and maples.
People who benefit from the properties of others, whether monetarily or not, dislike seeing those benefits taken away, even when owners have the full legal right to do so. I would not reproach either neighbor if they decided to root out their lilacs, but I would miss the scent and the separation the hedges give. And the food co-op will be at least a bit less attractive to shop at if a blocky commercial building is next door rather than a mini Birnham Wood.
People seldom try to block such changes when they know the owners personally. If a neighbor erected a huge addition that shaded my gooseberries, I would never think of objecting. But if a new owner scrapped the existing house to build a McMansion, as often occurs in Edina, I might contest it at the zoning office. If the seminary builds a new library, there will be little opposition. If it tries to sell to a commercial developer that will build a swank office building, it will be hard to get needed zoning changes over the opposition of neighbors. But what if the offices are for a social service agency of the same denomination?
Wetlands serve a common good of runoff reduction and aquifer recharge. We now limit their destruction. Trees improve neighborhoods in many ways that benefit all. So why not impose similar restrictions on their removal, as is happening in my neighborhood? Or, if we prohibit the clearing of all trees from a commercially-zoned lot, should I have been banned from removing the scraggliest of the five big oaks on our lot when we built our garage 28 years ago?
Note that imposing limits on use long after property tracts were acquired favors early developers. Much of my net worth stems from the fact that my mother drained a lot of wetlands 60 years ago, drainage that would never be permitted today. Should I condemn other farmers who want to install drainage tile now? If someone bought a commercial lot 60 years ago as an investment for their grandchildren’s benefit and let small trees grow into large ones, should we now confiscate much of that saved value so that the rest of us can continue to enjoy the benefit of a nice urban grove?
There is no right and wrong here. Impose no rules on property use when there are external effects and the economy is worse off. Resources are wasted. Impose too many rules and some people end up being treated unfairly while the economy may similarly lose efficiency. The old legal idea of “the rule of reason” is important but highly subjective.
Note that Zaire and Brazil are in the same boat as the seminary and the owner of the undeveloped lot. For decades or centuries, they left their oxygen-rich forests alone while North Americans and Europeans cut down millions of acres of primeval temperate forests. Now richer people argue that tropical forests are the “lungs of the world” and castigate these poorer countries and private developers for inadequate preservation efforts.
Conservation advocates are right that the world will be worse off, perhaps tremendously so, if tropical rain forests are eradicated. But we don’t want to pay for their preservation. We live in houses that were built cheaply by our grandparents because we clear-cut nearly all the pine in northern Minnesota, and most of us don’t blink at buying plywood on sale at the local big box just because it obviously is from the tropics.
There are no easy answers here and less moral high ground than many organizers of NIMBY protest meetings think. We economists can point out some of the trade-offs that others might ignore, but we have no surer insights on where lines should be drawn than anyone else.