Peter G. Stillman wrote:

> ... (a governmental dictate) that 
> airplanes should be forced to try to reduce their
> noise,

But that would not be efficient if the social costs of
having the residents move are less.

> government [officials] might think, for instance,
that restrictions on noise might lead to technological
 innovation about noise control that would produce
benefits throughout the society,<

It is uncertain whether there would be innovations,
and if not, the resources are wasted.
This is like proposing that we stop penalizing theft
in the hope that this will stimulate technological
innovation in locks. 

> why not make the railroads reduce their sparks --
perhaps also by giving them a corridor that farmers
need to stay out of.<

Because this may not be the most efficient solution.

> when I first ran across Coase, it seemed to me that
environmental issues were completely ignored by his
article -- or, rather, they were left to 
> the negotiations of the individual parties, neither
> of whom need care about the environment.

You miss the whole point of Coase.  The damage caused
by sparks is an environmental externality, so this
issue is the very topic analyzed.  If other parties
are effected, this comes under the Coasian rubric. 
Either they too can enter the negotiations, or else
the transaction costs are too high, Coase implies that
other remedies, such as Pigovian compensations, can be
applied.  But Coase tells us that Pigovian policies
should be applied to the least costly remedy.

Fred Foldvary