The Externalities of Rabbits

When reading Coase's article, The Problem of the Social Cost, his discussion of the externalities of rabbits stuck out to me, as I knew that I had heard about a similar predicament in the past.  No, I didn't learn about the liability of rabbits in another economics course, rather, I had read about a very similar situation in Miss Penny and Mr. Grubbs by Lisa Campbell Ernst. In case you are not familiar with this 90s children book, Miss Penny and Mr. Grubbs are neighbors who compete for the best vegetables at the town fair, however, when Mr. Grubbs becomes jealous because years of coming in second to Miss Penny, he buys numerous rabbits and sets them free to feast upon Miss Penny's harvest.

In the discussion spanning from page 511-513, Coase discusses the fact that a person may be liable for smoke without owning the smoke, so in the same way, who owns the actions of rabbits that devour a neighbor's produce? Regarding the Boulston case which held the rabbit owner liable, Coase notes that we cannot always know who is liable for the action of rabbits, but in Miss Penny and Mr. Grubbs, the situation is slightly different because Mr. Grubbs intentionally released the rabbits into his neighbor's yard--they didn't wander over on their own. Miss Penny was not involved in the transaction for the rabbits, but she still faces an external cost in the decimation of her prized veggies. While at this part of the story, you might think that Mr. Grubbs has created a negative externality in the 'consumption' of the rabbits because the Social Marginal Benefit (SMB) is less than the Private Marginal Benefit (PMB). But the story doesn't end there! Though her crops have all been destroyed, Miss Penny makes the best of the situation and finds a plump bunny to enter in the fair. When this bunny wins first prize, Mr. Grubbs' action can be seen as a positive externality in consumption because Miss Penny was not involved in the transaction for the rabbits, but was still able to benefit from them--the SMB was greater than the PMB. The switching location of the SMB and PMB lines highlight the challenge of internalizing and accounting for externalities. Who knew that a children's book could teach so much about the complexity of externalities?!