Tony joins his colleagues for lunch at a local pub to discuss potential leads for their newspaper, but he’s disturbed by a gentleman loudly munching on chips behind him. The man appears to be ignorant of the external costs he’s imposing on those around him and is focused on only his own satisfaction.
When people are unaware of the external costs they are imposing on others, they tend to overconsume, literally. Since there aren’t clear property rights, it’s not clear who should make the determination of appropriate volume. Tony could pay the man to stop eating his chips, but Tony may argue that the man should have to pay for the right to eat his chips so loudly. It’s harder to reach a solution without clearly defined property rights.