Re: Bad analogy. You know why? Because all along we've been talking a property owner's right to control the disposition and use of his OWN property. Not his neighbor's.
Interesting that you mention this issue. What you are arguing is the way that economics used to look at property rights before 1960, under the rubric set forth by British economist Arthur Pigou. Pigou is attributed in economics for "pigouvian taxes", or common-sense taxes on negative externalities. For example, if I dump a bucket of toxic chemicals into the river, I would be taxed the amount necessary to clean it up.
Economists used to apply this reasonable logic to all cases of damages, or "negative externalities," especially pollution costs.
However, Ronald Coase published a ground-breaking paper in 1960 titled "The Problem of Social Cost". He later won the Nobel Prize for this paper, thirty-one years later, and single-handedly launched the field of law and economics, which I plan on specializing in.
To understand the Coase Theorum, take the simple case of a dentist and a candy manufacturer who live next to each other. The dentist cannot do his job because of the vibrations caused by the candy manufacturing next door. Under the theory of pigouvian taxes, the legal solution would be simple: the candy manufacturer must pay the dentist damages.
However, what this solution fails to take into account is the cost born by the candy manufacturer. It is not only the dentist who suffers because he lives next to a candy manufacturer; the candy manufacturer suffers because he lives next to a dentist. If the candy manufacturer lived next to, say, a sound-proof music studio, there would be no problem.
What Coase realized is that if transaction costs were zero, the socially optimal solution would result regardless of which party has the property right. In other words, lets say the dentist has the property right. If the candy manufacturer values his production greater than the dentist values his production, the candy manufacturer could agree to pay the dentist enough to either sound-proof his office or move to another location. By the same token, lets say the candy manufacturer has the property right. If the dentist values his production greater than the candy manufacturer values his production, the dentist could agree to pay the candy manufacturer enough to either install sound-reducing equipment or move to another location. The socially optimal result occurs in either situation, but with different distributions depending on which party can bare the cost more efficiently and which party is given the property right.
Anyway, getting back to what you actually said, painting one's house bright yellow is not necessarily a legitimate property right of the owner. For if we extend this argument a bit further, say, by covering my house in bright yellow neon electric signs, and then increasing the power to these bright yellow neon electric signs, and then - at a certain point - shining a high powered laser at your front door, until it bores a hole straight through your house - at a certain point, even the most libertarian among us will agree that simply by owning property I do not obtain full rightful control over all the light waves traveling from my property to other people's property.
I never thought I'd see the day when Rogue is defending libertarianism and I am arguing against it :P
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