The Tragedy of Noise

It is about time to talk about incommensurability... 

This graph is the all too well known externality graph (classic example is Mas-Colell, Whinston and Green, 1995). In this case h constitutes a negative external effect for individual 2 (created by individual 1), who would experience negative net effect of h for all h>0. The competitive equilibrium would be h*, where individual 1 would inconsiderately create as much of h until his marginal benefits would equal the marginal costs. The optimal externality level however would be h°, where individual 1 & 2 would think as one and maximize "social welfare". 

The troubling part is that there is evident way to evaluate h. Here I would like to consider the incommensurability of externalities, i.e. the lack of common standard for measuring a lot of this stuff. 

One real example could be the noise externality... If my flatmate listens to loud music and I get annoyed from time to time, there must be a way to figure out a solution with this excellent theory. Of course, it's a Coase problem - one needs to know who possesses the property rights. It needn't be me - the victim of noise externality. I could have well said when I moved in: "I don't mind load music". I might as well like it from time to time, just sometimes I get upset about it (i.e. my marginal utility ain't that perfect exponential curve).

So if it's really about Coase and the property rights lie on the other side, I could make "a transfer" to my flatmate (money, chocolate, washing dishes?!) in order for him to regulate the volume of music to a level that I would find acceptable and he would submit to after having received my appealing transfer. At this point it sounds quite nonsensical...

It is just not so natural to find a solution even if we had allocated property rights and could bargain about the process. What is that thing - that measure of noise that we would both appreciate in the circumstances?

... the Expanded Relative Form of Value...

"The value of a single commodity, the linen, for example, is now expressed in terms of numberless other elements of the world of commodities..."

Nobody could say it more beautiful than Marx, the value form is just an endless chain of equal values that mirror each other...

There are indeed quite many things to ponder about in this classic situation... maybe ethics play a role too, since my flatmate would turn the volume down if he knows it's disturbing and because all other flatmates think it's annoying at some point (kind of moral suasion argument).

There is much more to real life situations than economic theory, indeed.