Liability on environmental harm

Are environmental harms special?

Major pollution incidents and a concern for the future well-being of the planet have caused many lawyers to support the idea of a distinct civil liability regime for compensating environmental damage. But unless we are sure that environmental harms do deserve special treatment, special liability regimes may prove to be a mistake in the long-run. The main aim in the design of liability law should be to distribute the past costs of pollution rather than to punish or act as a future deterrent. A critical evaluation of the nature of environmental harms suggests that they are not special in a way that justifies a special legal regime, and where liability regimes are used as a means of raising money to clean up the environment they are a costly and cumbersome means of doing so. Similarly, when most legal systems start from a position that non-contractual liability for harm should be based on fault, it is difficult to justify in terms of legal policy and principle a pocket of strict liability for environmental harm. People who view environmental harms as presenting distinctive legal issues do so because they focus on the environmental source of the harm rather than its nature. This may be useful politically but it creates legal confusion. In constructing regimes for liability for environmental harms, it is important to appreciate the limits of compensation law for achieving our environmental goals.


Source: P Cane, www.oxfordjournals.com




To tax or not to tax

Utilitarian philosophical perspective seeks to maximize the aggregate happiness or welfare of the individuals that comprise the relevant political community.

For utilitarianism, the assumption that the happiness derived from each addition to one’s economic resources decreases as these resources increase (diminishing marginal utility) suggests that taxes and expenditures should (other things equal) be highly redistributive, since the increase in utility from transferring economic resources to the less affluent is greater than the utility that is lost by taking these economic resources from the more affluent. On this basis, for example, utilitarian thinkers like John Stuart Mill have often favoured graduated or progressive tax rates.
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On the further assumption that individual well-being is closely correlated with individual income, utilitarian thinkers have often favoured progressive income taxes – that personal consumption over the course of a year was a better measure of individual well-being than personal income. Others have occasionally argued that personal wealth at any time is a better measure of individual well-being than income or consumption. (This debate over the ideal tax base continues to this day.)

Despite their initial inclination toward steeply progressive income, consumption or wealth taxes, however, utilitarian thinkers and public finance economists whose views are generally shaped by this philosophical perspective typically back away from this prescription for two reasons:

1. Since taxes (and to a lesser extent spending programs) can discourage economically productive activities, the goal of redistribution must be balanced against the goals of efficiency and economic growth.

2. Since the collection of taxes and the transfer of economic resources is not costless, the benefits of redistribution must also be weight against the direct costs that must be incurred in order to achieve this redistribution.

Although early works in public finance tended to downplay these costs (and therefore preferred steeply progressive rates), more recent scholarship has devoted greater attention to these costs, as a result of which the focus for redistribution has tended to shift from the tax side of the equation to the spending side. Indeed, Professor Mirrlees pioneering work on optimal income taxation (1971) was a crucial contribution to this development.

A further intellectual contribution to this development is the work of American philosopher John Rawls, whose Theory of Justice (1971) placed particular emphasis on the well-being of the least well off rather than relative shares among more affluent sectors of society. Although his philosophical approach is generally not utilitarian in that it gives priority to individual rights rather than social welfare, this emphasis on individual rights is limited to basic liberties like freedom of speech and conscience and political rights like the right to vote and participate in public life. With respect to the distribution of economic resources, Rawls’ approach reflects a kind of modified utilitarianism which seeks to maximize the well-being of the least well-off rather than the aggregate well-being of all members of society.

Consistent with these intellectual developments, tax policy prescriptions over the last 30 years have generally emphasized lower marginal rates of income taxation, increased reliance on consumption taxes like the value-added tax, and the pursuit of distributive objectives through spending programs (especially targeted at the least well off) rather than taxation.



At the same time as modern public finance theory and the Rawlsian approach to distributive justice were becoming firmly entrenched in intellectual circles and beginning to influence tax and public policy, a very different intellectual tradition emphasizing individual rights and private property manifested itself .

Buchanan’s work on public choice theory applied economic analysis to government actors (legislature, executive, including the bureaucracy) and formulated a much less benign conception of the state than that assumed in collectivist and utliltarian perspectives. Regarding these actors as self-interested “rent-seekers”, Buchanan described the modern state as a fiscal Leviathan that needed to be controlled by constitutional limits on the power to tax (and therefore spend) – on the basis that many if not most tax and spending programs do not further the general interests of society as a whole, but instead advance the interests of government actors who benefit from the expansion of the state and voting coalitions who are able to use the state to engage in naked transfers of resources from other groups.


Professor David G. Duff, Taxation and the Distributive Function, Lecture at Oxford, November 2006