Coase versus Pigou on Independence Day
By Art Carden
As I write this on Wednesday night, I hear the sounds of fireworks going off in the distance. My first thought was “maybe distant fireworks were the ‘orange stuff’ my son saw that through his window that ‘scared [him]’ earlier when he called me to his room” (it was a while ago, so it was probably a lightning bug). Still, though, this gets me thinking about market failure. Two points:
1. As a lot of people have noted, one person’s trash is another person’s treasure. Or, in this case, one person’s non-rival, non-excludable public good–a fireworks display–is another person’s non-rival, non-excludable public bad–a series of loud noises that might wake the sleeping kids.
2. This is the first time I’ve noticed the fireworks since we moved here just over a year ago. The noise is an inconvenience, and one that could have awakened the sleeping kids even though it didn’t. Suppose it had. Am I entitled to relief as the victim of the spillover costs of others’ actions?