No one likes having a hazardous waste disposal facility in his or her neighborhood, even though that location may be the best choice from society's perspective. What about compensating these "losers" for having the site nearby? The benefit-cost criterion for risk management policies only identifies those cases where the gains are large enough so that there is a potential to fully compensate the losers. It is silent on the question of whether compensation should be paid or not.
Robert Cameron Mitchell and Richard T. Carson, in their article "Property Rights, Protection, and the Siting of Hazardous Waste Facilities" in the American Economic Review (May 1986), have proposed that communities as political entities be granted what is, in effect, a property right—that is, a right to refuse to accept proposed LULUs (locally undesirable land uses). Along with this right would be an obligation for the community to hold a referendum on any proposal to locate a LULU within its boundaries. Any corporation or larger government entity wishing to place a LULU within the community's boundaries would have to offer compensation to the community if it expected to gain approval through the referendum.
A version of this article appeared in print in the May 1989 issue of Resources magazine.
