The Great Bacon Debate

Although it's a little old, this is an article I read over the summer that I immediately thought of when we discussed externalities in class. It focuses on a restaurant and food truck establishment called Bacon Bacon in San Francisco, that was closed down due to a lack of required permits. The reason the restaurant didn't have the permits? Some of the restaurant's neighbors complained about the smell of bacon being cooked, especially some of the extra bits like the leftover lard at the end.

This article serves as a perfect example of external costs of production. When Bacon Bacon cooks and prepares the bacon, it creates a smell that is considered noxious by local third-party neighbors. This lingering smell is the difference between the private marginal cost and the total social marginal cost. A possible solution to this issue? Assuming the marginal benefit (revenues for the store owner, utility of bacon-lovers eating bacon) is greater than the marginal cost (the smell), the Coase Theorem states that whoever is liable should pay to reduce the smell. In fact, the article above has a line where one of the neighbors complaining "offered to help pay for an odor-abatement system," a great example of the Coase Theorem in action.

Checking Bacon Bacon's website, the outcome of this whole ordeal was that the city gave the restaurant the necessary permits. The owner, Mr. Angelus, is making renovations to the ventilation system to handle the smell. So bacon-lovers/economists rejoice, you can now eat all the bacon you want in San Francisco, at a point where the marginal benefit equals the social marginal cost.