The NY Times challenges the Coase Theorem today without ever mentioning Coase. Several examples are given of "neighbors going to war against each other" over low stakes stuff. To an economist, the puzzle here is why isn't there more "peace and love"? The fight didn't have to occur. Instead, they should have traded with each other. Let me set up an example and let's think this through.
You and I are neighbors and I use a leaf blower on Saturdays that makes you nuts. You suffer $80 of pain each time I use it when you are home. I would suffer $50 a week in "pain" if my lawn is filled with leaves. Given that we are neighbors and can easily communicate and you know that I have the right to use my leaf blower and you know that I"m the cause of the noise, we can solve this issue by trading. Suppose you give me $30 each week and in return I make sure to only use my leaf blower when you aren't home. Both of us are made better off by this "trade".
Of course, you would prefer not to pay me but nothing is free. Why don't these offers occur more often?
Another example is the famous fight between Bono and Billy Squier. Note that my solution involves no lawyers, no broken ribs and no laws. Yes, there is a mutual agreement on who has the "property rights" . When you enter a Starbucks, the buyer of a cup of coffee knows that he does not have a right to a cup of coffee. What is the difference between local noise pollution and a cup of coffee?
As Coase knew, much of the modern economy is actually a fight over who actually has the initial property rights. If we could all commit to a common agreement over who owns what and never renege on this deal, our society would be much richer.