Several years back, many Charlottesville citizens grew increasingly worried or excited over the prospect of a new Western Bypass. Those in favor saw a positive externality: this road would make travel easier for many people. However, those opposed- particularly those living close to the possible site of the road- viewed the negative externalities: the road would lower their home values and increase the noise level, disrupting their daily lives.
After taking economics classes, my views on this project have shifted. Looking at roads in general, if a proposed road were built by a private company, which Friedman suggests is an option if the road were excludable, then the residents around the road could work out a Coasian solution. Depending on the property rights, the road builder could either pay the residents for the right to build the road near them and cause them discomfort, or the residents could pay the builders to reduce the size of the road or simply not build it. Under Coase's assumptions, either way would lead to the same outcome. However, in a real world situation such as this, there are not two clear sides. Instead, some citizens will support the road, and some will not, while other free riders will remain uninvolved and hope that their side wins. Therefore, the transaction costs would be extremely high.
In the case of the Western Bypass, the government ultimately decided the fate of the road. Although the government's decision is almost certainly not allocatively efficient, nor is it proportionately representative, it provides a solution to the confusion and chaos caused by the real world negotiations a private market Coasian solution would cause.
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