Solutions to the problem of squealing children, Japan edition

Back in December last year, I wrote a post on dealing with the problems of squealing children at least cost:

Now, squealing children is a classic negative externality - an uncompensated impact of the actions of one party on a bystander. The poor residents of Stonefields face a cost that is imposed on them by the unscrupulous actions of the children. Since the children have no incentives to take into account the costs that they are imposing on the residents of Stonefields, they generate too much noise compared to the socially efficient optimum.

How best to deal with the problem of squealing children? In Japan, they use a command-and-control policy - a daytime noise limit of 55 decibels (night-time 45 decibels) in residential suburbs. That's not much louder than bird calls, i.e. a pretty extreme limit not conducive to playing children. Parents can be fined if their children exceed the noise limit, a solution to the problem that is based on the "polluter pays principle". Under this principle, the party that is responsible for the pollution is solely responsible for making restitution for the damage they cause.

However, Robin Harding reports in the Financial Times that Tokyo is considering changes to the noise regulations:

“In the past this wasn’t an issue but recently more people have been complaining to city halls, saying ‘the children are too loud, please stop them’,” says Yukie Nogami, chairwoman of Tokyo’s environment and construction subcommittee. “The law says city halls have to act.”

Ms Nogami’s committee will soon debate a proposal to carve out an exemption from the noise rules, either for children under 12 or for certain places such as parks and kindergartens.

In line with what I argued in December, the 'least cost' solution to squealing children might not be command-and-control policies like noise bans (which entail a high cost in foregone fun for the children), but sound-proofing the neighbourhood homes. Sound-proofing entails a one-off cost for each home, versus an ongoing cost of foregone fun. Of course, the cost of soundproofing every residential property (rather than just those located near playgrounds or day care centres) would likely be prohibitive.

However, once you have a command-and-control policy in place (like Japan's noise limits), it's going to be difficult to back out of. The noise limit created a new property right (the right to extreme residential quiet), and once created there is no Pareto-improving way to remove the right - that is, there is no way to remove the noise limits without making at least some people worse off. Who is going to be worse off? From the FT article:

About two-thirds of respondents to a consultation support the change but a minority is strongly against, complaining about everything from the lax upbringing of modern children to the effect on property prices.

The effect on property prices may well be real. If extreme quiet is valuable to Japanese homeowners (and prospective home buyers), then removing that property right is going to lower the value of residential homes (especially those close to playgrounds and day care centres). So at least some homeowners are right to be worried.

Moreover, the homeowners whose properties will be affected have a large incentive to protest the change in noise limits - the cost of the changes (in terms of lost property value) are likely high for each homeowner relative to the cost of protesting. Whereas the gains from the change in noise limits are spread widely among children and their parents, each of whom probably only gain a little from the changes. So expect lots of argument over this planned change, unless the homeowners can be adequately compensated. Following the compensation principle, if those who gain from the policy change (children and parents) can adequately compensate those who lose (affected homeowners), then the new policy (no, or higher noise limits) should be preferred. Since it would be difficult for children and parents collectively to compensate homeowners (free riders, anyone?), the compensation would likely have to come from taxpayers instead.

Of course, the better solution would have been not to have the extreme noise limit in the first place. As I noted in December (in relation to playgrounds in Stonefields):

The Coase Theorem tells us that, if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own (i.e. without government intervention). In the case of a bargaining solution under the Coase Theorem, it depends crucially on the distribution of entitlements (property rights and liability rules). Do children have the right to play and make noise? If so, then the residents would have liability to pay the children to be quiet - maybe buy them a bunch of Playstations and send them indoors to be quiet. Either that, or the children can just keep having fun in the playground and making as much noise as they like. On the other hand, do the residents have the right to peace and quiet? If so, then the children would have liability to compensate the residents for the noise of their playing. Either that, or they have to give up the playground.

Who has the rights? At the moment in Japan it's the homeowners, but I'm not convinced that was ever the least cost solution. As one respondent to the survey discussed in the FT article notes:

“To play and cry and make a big noise is a child’s right.”