Friends S09E19: The One with the Coasian Solution

Friends is an all-time great show. However, with Rachel being a fashion designer, Ross being a paleontologist, Monica being a chef, Phoebe being a masseuse/freelance musician, Joey being an actor, and Chandler being an IT procurement manager who specializes in statistical analysis and data reconfiguration, there is a clear lack of economics knowledge. Normally this wouldn't be a problem; however, in the 19th episode of the penultimate season, Monica and Phoebe's friendship is almost ruined over a problem that could've been solved if either read up on their Coase. In this episode, Monica notes how her restaurant is doing so well that they're booked for the next month. This causes Phoebe, who recently lost her masseuse license, to sing outside Monica's restaurant to try to make some extra cash. However, Phoebe's music has some negative production externalities on Monica's restaurant, as several customers say they were turned off by the music (songs about buying human spleens don't really say "fine dining").

Monica's solution was to politely tell Phoebe that her music didn't fit with the classy-theme of the restaurant. Phoebe agreed, but then arrived the next night singing the same songs, just in a fancy dress (she even buys a top hat and spectacles to appear fancy). This leads Monica to directly tell Phoebe that it's the songs that don't go with the theme, which sparks a fight among friends. Phoebe criticizes Monica's small portions and over-garlicky dishes and Monica continues to criticize Phoebe's singing ability.  However, since Monica does not own the sidewalk in front of her restaurant, Phoebe has the property rights and begins singing targeted songs to drive away customers, singing "the food here at Javu, will kill you."

Now let's take a Coasian approach and see what would've happened if Coase had written this episode. Monica would've noticed that Phoebe's singing was driving away n customers a day. At an average cost per meal per customer of c dollars, Monica would value Phoebe not singing at n*c dollars per night. Phoebe on the other hand, was probably making a (relatively) large amount of money singing for this wealthy crowd compared to her normal singing at Central Perk coffee house. Thus, her value of singing outside Javu is the difference between what she makes outside Javu and what she would have made outside Central Perk, let's call it j and assume that j < n*c (which it most likely is if Phoebe's accusations of over-priced meals are accurate). Thus, Coase would suggest that Monica pay Phoebe somewhere between j and n*c dollars to not sing outside the restaurant.

However, there is a reason Coase is not the writer for Friends because if Monica went to Phoebe and paid her to not play her music, Phoebe would probably react much worse than the way she reacted initially. While Phoebe and Monica made up in the episode, they may not have made up in Coase's version of it (and you can't put a price on the lost friendship). Coase may work for independent business agreements; however, when it comes to friends, money might not be the answer. Friends don't need money to settle arguments, because when it hasn't been your day, your week, your month, or even your year - they'll be there for you.