Most economists would appear to assume that the aim of governmental action in this field is to extend the scope of the law of nuisance by designating as nuisances activities which would not be recognized as such by the common law. And there can be no doubt that some statutes, for example, the Public Health Acts, have had this effect. But not all Government enactments are of this kind. The effect of much of the legislation in this area is to protect businesses from the claims of those they have harmed by their actions. There is a long list of legalized nuisances….
[Coase then details a few such instances - from both the U.K. and the U.S. - of legislation that relieves businesses from liability for damages that their activities impose on third parties.]
Most economists seem to be unaware of all this. When they are prevented from sleeping at night by the roar of jet planes overhead (publicly authorized and perhaps publicly operated), are unable to think (or rest) in the day because of the noise and vibration from passing trains (publicly authorized and perhaps publicly operated), find it difficult to breathe because of the odour from a local sewage farm (publicly authorized and perhaps publicly operated) and are unable to escape because their driveways are blocked by a road obstruction (without any doubt, publicly devised), their nerves frayed and mental balance disturbed, they proceed to declaim about the disadvantages of private enterprise and the need for Government regulation.
While most economists seem to be under a misapprehension concerning the character of the situation with which they are dealing, it is also the case that the activities which they would like to see stopped or curtailed may well be socially justified. It is all a question of weighing up the gains that would accrue from eliminating these harmful effects against the gains that accrue from allowing them to continue.