Tuesday, May 21, 2013

Bacon will not be a part of your 4 "Coase" meal in San Francisco. See here why.

Bacon, the perfect food in my opinion, is not beloved everywhere.

Bacon restaurant shut down for smelling like bacon
It turns out that not everyone loves the smell of bacon.
A San Francisco bacon restaurant, fittingly called "Bacon Bacon,” was forced to shut its door on Friday after neighbors complained that the "porcine aroma" wafting from the establishment was too strong.
There is an alternative way for this problem to be resolved without government interference.  It is applying what is called the "Coase Theorem": (here is a VERY simplistic definition---go HERE for more detailed explanation)
The Coase theorem states that where there is a conflict of property rights, the involved parties can bargain or negotiate terms that are more beneficial to both parties than the outcome of any assigned property rights. (from Investopedia)

The sweet smell of bacon waffling throughout the neighborhood imposes costs AND benefits on third parties (neighbors) not directly involved in the transaction (restaurant and its customers). 

Some people (by some people I mean me)  might LOVE the smell of bacon in the morning.  The closing of the restaurant is harming them/me at the cost of reducing harm to others, the bacon-haters.

An example of an outcome loosely consistent with the Coase Theorem would be for me, or the restaurant owner, or its customers to compensate the bacon aroma hater in the amount they feel like they have been harmed.  Compensation in dollars or tofu, maybe?

Is society better off with "Bacon Bacon" closed?  NOT in my humble cholesterol filled world.

How about you??
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