One year ago, I moved into a house that a cousin of mine had occupied for seven years. It's a small house in a nice neighborhood. On one side of the house is a field, and there is a neighboring house on the other side. But between the houses is a wide grassy area. At least it used to be grassy - when I moved in, it was packed dirt full of tire ruts. My cousin that had lived there, Ann, married the owner of the neighboring property. During their courtship, the grassy area between the houses was used as a communal parking space. They did not consider the costs and benefits their actions might have on others.

The spillover costs, or negative externalities, of their decision became apparent when they decided to move away together. My cousin moved out, I moved in, and the property next door was rented out. The negative externalities of Ann and her new husband's decision was that the new renters wanted to continue to use my yard to park in. I, however, was not romantically involved with any one of them, and didn't want to give up my lawn for their personal use. I approached Ann's husband and tried to discuss the problem with him. He now knew the spillover of his decision. But he refused to do anything about it.

So I went to the courthouse and found the original survey reports and lot measurements for my property. I then went home, measured out my lot, and put up a fence just within my boundary. The neighbors decided to stay in their own yard after that.

The cost to enforce my property rights was the price of the fence, as well as the time spent at the courthouse. These enforcement costs would have been too steep a price to pay if I rented just anybody else's house. However, since my cousin let me deduct my enforcement costs from my rental payments, I found the costs were worth the end result. I now have grass in my entire yard.