The expression "nimbyism" - after the phrase "not in my back yard" - became notorious a few years ago to describe a hypocritical attitude to social improvement. Most people support the building of new homes to cater for a greater number of families. But any idea of new housing in the countryside is vigorously opposed by local residents, who worry about the effect on property values.

There are many other forms of nimbyism. In theory people can see the effect of over-severe planning legislation in raising house prices and land values, reducing growth and employment and increasing income disparities. But the same people, even if they are economists living in the country outside a university city, do not find it easy to accept an industrial or office block in their own vicinity. A particularly controversial example concerns the siting of units for disposing of atomic waste.

Some economists believe they have a way of dealing with such questions. This is to offer the localities affected a sum of money to accept the required changes. The edifices can then be put up where the inhabitants believe that the monetary incentive is greater than the environmental disadvantage; as a result everyone could be better off.

Bruno Frey, a Swiss economist, has studied how such schemes have worked in relation to the disposal of Swiss nuclear waste*. A preliminary investigation took place in Wolfenschiessen, a small village in central Switzerland with a population of 2,100. But to the consternation of the economic advisers, the offer of cash to the villagers, whether in the form of individual payments or cash to the municipality, only increased the opposition.

The villagers were certainly not going to be bribed into accepting a nuclear disposal plant in their back yard. But then a strange thing happened. In the course of a year or two opinion swung round and the process was approved by a three-fifths majority. The plant now stands there.

Frey draws an analogy with a play by the Swiss dramatist Friedrich Durrenmatt, entitled The Visit. It is the story of a woman who returns after many years to her impoverished home town after having married a series of millionaire husbands and become the richest person in the world. It was made into a 20th Century Fox film, starring Ingrid Bergman and Anthony Quinn.

The play begins with her arrival at the station of Gullen, where the express has been halted especially for her benefit. She is given a ceremonial welcome by the town's dignitaries, who are dependent for their hopes for restored prosperity on an expected benefaction of $5m from her. I had expected the Old Lady to be someone in her seventies with a veil hanging from her hat and layers of chalky make-up. In fact she is an ostentatious woman in her sixties travelling with exotic effects, including a black panther, and a retinue of servants and ex-husbands.

She is indeed prepared to oblige - but on one highly embarrassing condition. This is that they put to death a citizen named Ill, who jilted her as a young girl and bribed his way out of a paternity suit. Of course the townsfolk are outraged by this suggestion. Nevertheless they start spending money lavishly, buying new clothes and revitalising their shops in the expectation of bounty to come. By the final act they have decided to dispose of Ill. Their excuse is that his behaviour all those years ago was highly immoral and a blot on their good name.

Prof Frey is halfway there when he makes a comparison with nuclear waste disposal. In conventional economics there is no real difference between a bribe and an offer of compensation, except for the distributional effects. If the inhabitants on the western fringes of Greater London are bribed to accept a new Heathrow runway, this is seen as similar to what would happen if the government compensated those affected on the basis of a fall in property values, or any other factor.

Frey realises there is more to it than that. Compensation is regarded as morally acceptable, while a bribe, however politely disguised as a cash inducement, is a matter for outrage. In his interpretation, the inhabitants of Gullen gradually come to see the terms they are offered as legitimate compensation.

Although I know much less about Swiss drama than Prof Frey, I do not think he has penetrated to the heart of The Visit. The reason why the citizens engineer the death is not because they see the Old Lady's cheque in slightly different economic terms but because they work themselves up into moral outrage at Ill's behaviour all those years ago. The result is that his behaviour, which did deserve some penalty and perhaps even some atonement, becomes an excuse 40 years later for an undeserved death sentence.

The lesson seems to me to transcend any normal economic calculus. It shows how cruelly people can be induced to behave when they think they are behaving morally. A distinction is sometimes made between moralistic behaviour and the genuine moral kind. This is a distinction that I remember singularly failing to impress on one distinguished philosopher, despite the numerous examples surrounding us, such as the death sentence and torture inflicted by the Taliban in Afghanistan on women who are accused of having broken some archaic moral code.

More trivial examples, of relevance to economic policy, occur all the time - for instance when teaching unions are outraged at the thought of merit payments, or of paying science and maths teachers who are in short supply more than their arts colleagues.

If I had one wish for the new century it would be to have less moralism and more genuine morality. It would even help with the siting of nuclear waste.

* Bruno Frey; Inspiring Economics: human motivation in political economy; Edward Elgar