Comment by myrmidon

Costs to clean up a mess from an underregulated industry can be bigger then the whole industry causing it. This is not even untypical.

Examples: Leaded gas, tobacco, CO2 emissions, dam breaks, reactor meltdowns, air pollution (really pollution in general; river/groundwater contamination for your septic tank example)...

If you underregulate, you end up with frequent cases where not even imprisoning and dispossessing everyone remotely involved/culpable is gonna get you sufficient compensation; this is extremely undesirable.

Companies are frequently gonna steer towards such scenarios, too, because they can allow them to externalize costs.