Privacy Versus Views: A Law and Economics Approach to Balancing Conflicting Urban Values

31 December 2018
By Kevin Counsell

Conflicts between neighbours are an inevitable consequence of modern urban living. One common conflict for many hill-dwelling households is balancing the privacy of one household with the views of another. This exact conflict played out in 2015 in the New Zealand courts, in the widely-publicised case of Aitchison v Walmsley. The case arose because the Walmsleys had built a large fence to provide privacy to their backyard in a Wellington hill suburb, but in doing so they completely blocked the Aitchisons’ stunning panoramic views of the Wellington harbour and cityscape. The courts were asked to decide on the legality of the Walmsleys’ view-blocking fence – that is, to resolve the conflict of privacy versus views.

In this article, NERA Senior Consultant Kevin Counsell uses the Aitchison v Walmsley case to illustrate the economic concept of externalities, which arise when one party’s actions harm another party. Despite this harm often appearing to come from only one side, Aitchison v Walmsley shows the reciprocal nature of externalities. That is, externalities arise because two (or more) parties want to use the same scarce resource, but in inconsistent ways. While one party wants privacy, the other desires views.

Kevin’s article considers how externality problems can best be resolved, and illustrates this with two principles from the field of law and economics: the Coase Theorem and the Hobbes Theorem. These principles provide a strong conceptual foundation for legal and economic analysis that can balance conflicting values – such as privacy or views – in a way that best benefits society.

The full article was published in the 2018 edition of the New Zealand Journal of Environmental Law, Volume 22.