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I forget who, Ronald Coase, I think, got his Nobel Prize in Economics for his work in externalized costs, like air pollution. He showed that in a system of strictly enforced private property rights, not only will the costs not be externalized, but they will be internalized in the best interests of everyone actually affected.
For instance, if you live downstream of a chemical plant, and their emissions (air or water or whatever) affect your property, with strict property rights, you have a right to compensation. This is true even if the contaminant is at trace levels. If you are scared of trace chemicals, either the company has to stop emitting those chemicals, or compensate you for your fear, as determined by a jury of peers. Contrast that with government regulation, where if I live downstream of a chemical plant, I have no choice but to tolerate whatever level of contamination the government allows them to emit.
Who would likely be the happier -- the one who had restitution tailored specifically for him, or the one who had a one-size-fits-all, deal-with-it government solution?
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