In a recent interview with Tyler Cowen, Nobel Prize winning economist Joseph Stiglitz stated his opposition to housing deregulation:

One person’s freedom is another person’s unfreedom. That means that what I can do . . . I talk about freedom as what somebody could do, his opportunity set, his choices that he could make. And when one person exerts an externality on another by exerting his freedom, he’s constraining the freedom of others. If you have unfettered building — for instance, you don’t have any zoning — you can have a building as high as you want. The problem is that your high building deprives another building of light. There may be noise.

Stiglitz is no doubt right that increased construction creates negative externalities. But he’s wrong to suggest that this settles the matter.

For one, increased construction creates positive externalities that likely exceed the negative ones. Increasing the supply of housing makes it easier for workers to move to better jobs, which accelerates economic growth. And denser cities reduce the need for cars, which in turn reduces carbon emissions.

But another reply to Stiglitz spotlights a point that’s often overlooked in discussions of negative externalities—sometimes you have the right to create them.

Take a simple case inspired by the philosopher Robert Nozick. Carl proposes marriage to the love of his life, Alice. While Alice is mulling it over, Bob proposes and Alice accepts. Crucially, Alice would have accepted Carl’s proposal were it not for the one made by Bob. So Carl lives out the rest of his life alone and miserable thanks to Bob. Bob’s proposal to Alice, then, creates a grave negative externality. Indeed, the harm that Carl suffers is far worse than the harm suffered by those whose view is blocked by a freshly built high-rise.

Still, Bob has the right to marry Alice even though doing so harms Carl. In short, he has the right to propose marriage and Alice has the right to accept. Moreover, Carl does not have a right that Alice accept his marriage proposal. So while the outcome is regrettable for Carl, he has no grounds for interfering with it because no one’s rights were violated. 

In the same vein, the mere fact that a new high-rise makes a resident worse off doesn’t justify blocking its construction. To sort out that question we’d need to sort out the relevant rights claims. Assuming that the property used to build the high-rise has been acquired justly, then its construction is at least presumptively permissible. The developer has the right to use her property as she sees fit, including using it to build something tall.

Of course, not everything you might do with your property is permissible. You can’t use your baseball bat to kneecap the opposing pitcher. But that’s because the pitcher has a right of bodily autonomy that protects his knees from being smashed. 

Is there a similar right in the case of building that could void the developer’s property rights? I’m skeptical. At first blush, the best candidate is something like a right to not have a desirable view be obstructed. Unfortunately for the opponent of housing deregulation, this sort of right simply doesn’t seem plausible. 

To see why, suppose you adore the sight of my hair. Suddenly I decide to start wearing a hat. I’ve obstructed a view that you find desirable, but clearly you have no right to stop me from doing so. At the very least, the idea that you have a right to an unobstructed view needs some refinement.

Maybe idea can be salvaged by restricting it to cases of severe harm. Plausibly, the harm you suffer from an obstructed view of the sunset is greater than the harm you suffer from an obstructed view of my hair. But the severity of the negative externality alone isn’t enough to show that someone isn’t within their rights to impose it. The harm Carl suffers as a result of Bob’s marriage proposal is greater than he harm he suffers as a result of a new high-rise. Since Bob may propose to Alice, it seems as though he may also build a high-rise near Carl. After all, it would be strange to allow Bob to impose the more harmful negative externality (a life of solitude and misery for Carl) but not the less harmful negative externality (an obstructed view of the sunset for Carl). Or imagine that Carl owns a small bookstore and Bob moves in next door with a Barnes & Noble. Bob might end up running Carl out of business, but he’s still allowed to do it. The broader point is that an actor may be free to act even in cases where the action creates a negative externality. At most, the presence of a negative externality starts a conversation, but it doesn’t end it.

 

Christopher Freiman is a Professor of General Business in the John Chambers College of Business and Economics at West Virginia University.