Living Economics

The Annoying Neighbor
Jenna Smalley
Tit-for-tat is one way to force producers of negative externalities to internalize them.

My house is a few blocks away from campus, and my neighborhood is usually peaceful. That is until the mother of the family who lives diagonally across the street and to the left of me gets into her car.

Every day, it doesnít matter what time it is, she gets into her car and honks at the rest of her family to hurry up and come out. She doesnít just honk once; she honks about every twenty to thirty seconds that they are late coming out to the car. She has also been known to roll down her window and scream at the kids in between honking at them. Itís not just at her kids though; she screams at her husband this way as well.

All of this honking and yelling drives me crazy, and wakes me up all the time. Of course, all the dogs in the neighborhood get stirred up because of her and begin to bark. My older brother, who lives next door to me, and across the street from her, has a dog that gets stirred up and starts to bark. This drives my brother crazy too! All the noise that this lady causes in the early morning hours, afternoon, and even sometimes late at night is creating negative externalities. Negative externalities are produced when someone whose actions impose costs or inconveniences on unintended parties. Producers of negative externalities do this without even realizing it, or taking into account what effect they may be having on others.

Knowing how my brother and I feel about her honking so much, I would bet that a lot of the other neighbors feel the same way we do. I thought about buying her a cell phone so she could harass her family quietly than bothering me another early morning. But this will not happen because the transaction costs are too high. Transaction costs are the costs of arranging agreements between buyers and sellers. In this case, the actual cost of buying/paying for a phone for her, meeting with all the neighbors about the problem, gathering money, and actually telling the woman is not worth doing. A solution that seems simple is really too much trouble to even do; much less do I want to be the one to tell her that she bothers everyone.

Fortunately, there is an alternative solution involving lower transaction costs. My boyfriend, whom she bothers too, made her well aware of her annoying behavior one morning when he became angry with her. He went outside with a small air horn, aimed it directly at her, and honked it every time she honked her horn. Since then there has been a dramatic decrease in how often she honks her horn at her family! And her negative externalities are finally internalized.

  1. Jenna Smalley is an undergraduate at the University of Memphis.
  2. Jenna Smalley is an undergraduate at the University of Memphis.
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