If you pump out pollution that damages my property, then you're liable for that.

See Walter Block as he has done a lot of writing on this subject: http://www.walterblock.com/wp-content/uploads/publications/misallocations_externalities.pdf

Thanks for the replies, guys.

So essentially the libertarian solution to the problem of externalities is to make use of the legal system.  I agree this can work in cases where this a clear delineation of the infringer and the victim -- for example if an oil company pollutes my property.  However, how would you handle cases that transcend national boundaries, and/or the victim is the globe as a whole?  Acid rain was a classic example of the first case: sulfur emissions from power plants in one country would cause acid rain to fall in countries downwind.  I reckon this could still be solved using the legal system, though it would require a transnational legal system that all nations would be bound to.  Anyway, I'm glad that libertarians also agree that we do need strong transnational institutions (like a World Court).

The idea of a world court isn't a bad idea per se. A hypothetical free world would be stateless so there would be no national boundaries or institutions like the present day UN. If there would be any significant free areas where there is (at least reasonably "libertarian") private law and enough defense capabilities, I think that government worldwide would be pretty swiftly abolished. I think libertarians shy away from making pie in the sky promises because of how politicians act but I also think that the prosperity from free migration and free enterprise would be pretty astounding. Any still existing states or polluters who want to play by different rules would just be treated like any other criminal organization.

jon_smark, I just wrote a relatively long post answering some concerns as to how a free market peer-to-peer court/legal system could handle negative externalities such as pollution:

http://forum.bitcoin.org/index.php?topic=17426.msg277907#msg277907

Basically, pollution is a form of trespass on your property, and therefore polluters can be sued for legitimate damage to your property.

Well now this gets more complicated.  The issue here depends on whether that land next to the factory was previously unowned or not.  Provided that the factory owner was the first one to construct his factory on the unowned land, he may have gained rights to pollute the neighboring land assuming it was legitimately homesteaded.

I was referring to the fact that in that case, the polluter may have legitimately homesteaded pollution rights to that neighboring land.  I can't predict what a free market peer-to-peer legal system would rule in this particular example, of course.

IMHO libertarians rely too much on the Coase theorem. It's only meant to apply to cases where transaction costs are effectively zero, which is rarely the case (Bitcoin excluded ).

It is hard to say.  I don't think market-anarchists claim to create a perfect world, but rather they simply think that competing peer-to-peer dispute resolution agencies where law arises through a common law-like mechanism is preferable to monopolistic top-down hierarchical legal systems (ala USA) where law is enacted by legislative fiat.  It is strange how people commonly accept that competition areas such as biological evolution, business, sports, etc. will produce desirable outcomes, but, for some reason people have been conditioned to assume that competition in such fundamental areas such as security and law is unfathomable.  Market-anarchists simply extend competition to these essential areas.


I actually tend to have the same view.  I am reminded of a David Friedman (anarcho-capitalist son of minarchist economist Milton Friedman) lecture on the related topic of market failure.  His argument is that while market-failure may admittedly exist in a free-market, there is even worse market-failure in the "political-economy" due to the concept of rational ignorance.  The tl;dr summary is basically that both voters, interest groups, lobbyists, and politicians are not exactly incentivized to understand the effects of their policies on the public good.  Each entity in this "political market" is just incentivized to do the "best" thing for themselves, which may not be the best policy for the 300million people making up the public.  He gives a great and entertaining speech just on this topic on youtube: "David Friedman's speech on market failure @ the 2010 Free State Project Liberty Forum : Part 3/7"

(update: for those of you who are ambitious readers, please check out Chapter 18 "Market Failure" of David Friedman's book on Price Theory http://www.daviddfriedman.com/Academic/Price_Theory/PThy_Chapter_18/PThy_Chap_18.html where he talks about the market failure of voting under the header "PUBLIC GOODS AND EXTERNALITIES")

Yeah!  Double-Wammy.    And it gets worse, since voters and politicians aren't held legally liable for damages caused by their policies.

Exactly.


And, as I asked in another thread, what prevents the people with money (which, will be the people polluting) from controlling the privatized legal system and making their polluting completely ok? 

Even if the privatized legal system remains perfectly neutral and immune to influence (nearly impossible), under what authority and with what force are the decisions enforced?