No Coasean Solutions for Strong Odors

A Southern California company that produces Sriracha hot sauce was ordered to shut its doors, after a Los Angeles County judge ruled in favor of residents who said the smell drove them to distraction.

The odor from the Huy Fong company was so overpowering that some residents suffered headaches, watery eyes and soar throats, CNN reported.

The city said it tried to reach an agreement with the company to install a filtration system that would confine the odors, before pursuing the court route. Huy Fung officials did not immediately comment but in a previous media report, said the filtration system the city wanted was prohibitively expensive.

Cheryl K. Chumley, Washington Times.

I propose a Sriracha tax.

8 thoughts on “No Coasean Solutions for Strong Odors

    1. JCatalan

      It’s been a while since I’ve taken law and econ, but I wonder what kind of ruling theory suggests. What they did in this case seems like a corner solution, and would any economist support a corner solution? I suppose, theoretically, we can conceive of a situation where it’s best to close the factory down.

      1. genecallahan

        The message of Coase is that “blackboard economics” is NOT the right way to decide these things: look at the particular case and circumstances. Recall that he really disliked the “Coase” theorem.

          1. genecallahan

            “the guidelines to legal rulings are an alternative to the Coase theorem.”

            I’m not sure what you are claiming here. How is a guideline an alternative to a theorem?

          2. JCatalan

            The Coase theorem says that, in a world of zero transaction costs, externalities will be solved by side payments between the involved parties, regardless of the legal ruling on property rights.

            In a world of positive transaction costs this is no longer necessarily true. Legal rulings will oftentimes decide how property rights are divided, so these legal rulings should be done with some consideration of economics (what is a comparatively optimal solution). We rely on the law because the Coase theorem doesn’t apply.

Leave a Reply

Your email address will not be published. Required fields are marked *