The existence of non-optimal amounts of pollution is due to the failure of the state to create or enforce property rights in the environment. The solution is to apply the principle of property rights to the air, to seas and to rivers.
Private nuisance (such as the neighbour's bonfire) is usually dealt with effectively under common law, but in the area of public nuisance the system functions badly. If you are building a steel mill and are causing damage not only to your neighbour but to all the inhabitants within a forty-mile radius, the threat of a suit and the imposition of damages is in fact far less, since only an agency of the government is empowered to sue for public nuisance. Effective public nuisance suits would, in practice, mean the creation and enforcement of property rights in the air and water.
It may be objected that there is a difficulty in this solution to the pollution problem in that there are a large amount of damages to be claimed, but each one is a small amount, so that it is not worth anyone's while to sue. To solve the problem, it has been suggested that the law be modified to allow an individual to bring a 'class suit', a suit requiring payment of damages to himself and all others similarly damaged, however many thousands there may be. Says Robert Nozick, 'lawyers would go into business as 'public's agents', charging a yearly fee to collect and turn over to their clients all the pollution payments to which they were entitled.'
Note: 'Anarchy, State and Utopia' by Robert Nozick (published by Basil Blackwell, Oxford, 1975).