Diane Coyle reviews Forever Contemporary - The Economics of Ronald Coase, edited by Cento Veljanovksi.
It starts with the Coase theorem: that when property rights are clearly assigned and there are no transactions costs (such as those involved in acquiring information, negotiating, monitoring compliance etc), then there are no externalities leading to a divergence between private and social costs: the parties involved will negotiate their way to the efficient outcome. ‘Externalities’ are symmetric, he argued: if you claim a right to clean air, you are costing me the opportunity to pollute. Who compensates whom will depend how the property rights are assigned. If you indeed have your clean air right, I will have to bargain with you to pay you for the pollution; if I have the right to produce emissions, you will have to pay me to desist.
Coase made it clear he took the existence of transaction costs very seriously, and argued that every situation had to be carefully assessed to determine the most welfare-enhancing course of action.…Download free PDF.
The useful bibliography of Coase’s work shows how seriously he took his own conclusion that you have to look in detail at each industry, its history and specificities before pontificating; as is well known, he described anything else as ‘blackboard economics’...
Case method instead of formal theory.
The Enlightened Economist
Coase in theory and Coase in practice
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation
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