Coase Theorem

Public goods contrast with private goods. Pure public goods have the unique characteristics of non-excludability and non-rivalry in consumption while private goods are sold to those who can afford to pay the market price. The under-supply equilibrium of a public goods provision is an important aspect of the provision of public goods. The economic theory of clubs represents an attempt to explain the under-supply equilibrium of a public goods provision. It raises many different and controversial issues which impinge on government policy in the public sector. In many respects, a club provision proffers an alternative to a central government provision of local public goods. The salient characteristic of a club, the excludability factor, may militate against an equal and democratic distribution of the club good. At the level of voluntary clubs, with which Buchanan was originally concerned, club theory can critically appraise the efforts at achieving optimal membership of the club and the...

This paper revisits the record of the Comprehensive Agrarian Reform Program (CARP) in the Philippines over its quartercentury existence. By 2014, it shall have accomplished 99 percent of its target—an impressive success for a government program. As a program to advance the economic welfare of farmers, however, it has accomplished the opposite of its stated goals. Productivity in coconut and sugar has fallen drastically, and poverty incidence among beneficiaries in agrarian-reform communities is even higher than among farmers in general. CARP and CARPER (Comprehensive Agrarian Reform Program with Reforms) have created a new social class: the landed poor. The design and implementation flaws that brought about this result are explored, including carp’s suppression of the market for land assets and its rigid five-hectare landownership ceiling, which led to the demise of the legal rural financial market and the flight of private capital. The paper argues for a shift in the policy focus henceforth from equity to efficiency, and the revival of markets for rural output and credit by, among others, lifting landownership limits for productive farmers and publicly registered corporations.

... POLITICAL ECONOMY AND LAW AND ... By changing the name of his research programme to constitutional political economy Buchanan distanced himself from those parts of the public choice literature that remained too close to the traditional welfare economics approach. ...

The events of 2016 in which the artist Peter Doig was sued in U.S. Federal Court for failing to authenticate an artwork for a speculative investor are emblematic of a view of the art world from the perspective of collectors and not artists. This paper imagines what would happen if artists were to retain 10% equity in their work in the primary market, rather than receive resale royalties in the secondary market. This idea applies Coase Theorem in economics, concerning the relationship of property rights, pricing, and trade. Accordingly, those equity shares could trade in a standalone marketplace well before an artwork was sold, which would provide both patronage for artists and more diversifiable art fund structures for investors. Technological systems such as the blockchain (e.g., bitcoin) make such a system timely, by providing cheap accounting and automatic provenance, so that the trade and management of such shares is less bureaucratically onerous. This proposal stands in stark contrast to much of the writing on resale royalties, which treats profit-sharing by artists as welfare or subsidy, or emphasizes a lack of enforceability and tendency to help only the handful of already successful artists. In fact, assigning equity shares to artists allows them to participate more accurately, from a free-market-economics standpoint, in the value that their work creates. This realignment of price and value could radically alter and also stabilize the art market in relation to both recent financial crises and increasingly common signs—e.g., complexity of auction consignment contracts and prevalence of freeports—of the financialization of art objects. Such a system also generalizes to the alignment of price and value in many other sectors of creative work, and beyond.

This classroom experiment introduces students to the concept of double marginalization, i.e. the exercise of market power at successive vertical layers in a supply chain. By taking on roles of firms, students determine how the mark-ups are set at each successive production stage. They learn that final retail prices tend to be higher than if the firms were vertically integrated. Students compare the welfare implications of two potential solutions to the double marginalization problem: acquisition and franchise fees. The experiment also can stimulate a discussion of two-part tariffs, transfer pricing, contracting, and the Coase theorem.

In “The Problem of Social Cost” Ronald Coase was highly critical of the work of Cambridge University Economics Professor Arthur Cecil Pigou, presenting him as a radical government interventionist. In later work Coase’s critique of Pigou became even more strident. In fact, however, Pigou’s Economics of Welfare created the basic model and many of the tools that Coase’s later work employed. Much of what we today characterize as the “Coase Theorem” was either stated or anticipated in Pigou’s work. Further, Coase’s extreme faith in private bargaining led him to fail to see problems that Pigou saw quite clearly and that remain with us to this day.

To analyze the feasibility of applying the Coase Theorem, this article uses two traditional arguments, economic calculation and
non-neutral effects, found in the Austrian literature. This article argues that the efficiency calculation a judge undertakes is problematic and that his decision should not be considered neutral with respect to the general equilibrium (even with zero transaction costs). These problems imply serious challenges to the application of the Coase Theorem.

В статията си" Проблемът на социалните разходи " Роналд Коуз критикува традицията на Пигу за справяне с отрицателните външни ефекти. Коуз предлага, когато са налице транзакционни разходи, правата на собственост да се дадат на страната, която може да ги използва по-продуктивно. Това предложение обаче лежи на статично разбиране за ефективността, а в дългосрочен план икономиката не е простата сума от статичните моменти, анализирани поотделно. При добавянето на повече периоди и засегнати страни, несигурността в икономическата система ще се увеличи и динамичната ефективност ще се понижи.

After 50 years of artistic and popular acclaim, the world-famous Sidmouth Festival collapsed in 2004. Its management was unable to secure bad-weather underwriting worth £200,000, despite an alleged £5 million Festival contribution to the local economy. In examining the reasons for this failure, we look at questions such as positive and negative externalities, ideological differences between Festival visitors and local residents, heterogeneous character of the local businesses, rural-or-urban and one-company versus multi-firm nature of festivals, incredible claims, emotions in economics, moral hazard, path dependence, and management mistakes. We argue that the only realistic way forward includes Festival supporters making financial contributions commensurate with their respective financial interests or artistic commitment, and their contributions giving these supporters full ownership rights.

Ronald H. Coase has made significant contributions to the development of the Law and economics approach as an economist. For this reason, the main purpose of this article is to examine Coase's methodology. With the help of his articles in this direction, his views on the science of law and economics, Criticisms made to him and his solution to the problem of externality were analyzed. According to this, giving importance to Reality in economics, avoiding mathematical techniques and being against economic imperialism show Coase's methodological differences. Examining the working principle of economic systems to benefit from legal cases has brought a new solution to the problem of externality. In this paralel, the solution of Coase is based on the obligations of both sides and the problems of externality with lower cost are solved by mutual agreement of the parties without state regulations. However, property rights must be clearly defined in order for the parties to tend to agree. Thus, Coase's methodology emphasizes the importance of law in the economic problems.

Approaches to economics which will be outlined are:
(1)  Neoclassical economics;
(2)  New institutional economics;
(3)  Behavioral or psychological economics;
(4)  Old or orthodox (conventional) institutional economics; and
(5)  Evolutionary economics including co-evolution.
Some attention will also be given to views associated with the Austrian School of Economics and its relationship to the perspectives listed above and to game theory.

Ronald Coase, a famous economist from the Chicago School of Economics, is known as the father of New Institutional Economics (NIE).

This new field of research was a significant innovation as it sought to analyse law and institutions from an economic efficiency perspective: its main premise is therefore that law should be efficient from an economic standpoint.

This paper will thus address smoking regulations from a Coasian perspective, that is from the perspective of their efficiency.

For at least fifty years economists have argued that vertically-aggregated marginal willingness to pay, when set equal to marginal provision cost, will result in optimal public good provision levels. This methodological approach would be expected to yield an exact analog, in terms of optimal levels of public good provision, to efficient provision of private goods in a perfect market setting. There is, however, a potentially serious flaw in the approach as actually practiced, since initial incomes are implicitly–and wrongly–taken to be optimal. From a given income, the output demand revelation problem has long been recognized–that there will be difficulty inferring true demands for public goods at that income (the traditional `free rider' problem). But what has failed to receive widespread recognition among theoreticians, and especially among practitioners, is that there will also be a concomitant `input demand revelation' problem. In any situation where workers cannot indivi...

The ultimate goal of this paper is to derive inspiration from Coase Theorem and the Japanese model of Keiretsu to empower the producers and suppliers of fish – namely, the fisher folk and to place them at the centre stage of control of rural entrepreneur-led private organizations, wherein the fisher community will not be deemed as mere consumers or vendors of fish, but will enter as dignified co-producer partners with significant shares in residual claim and residual control in those organizations.[W.P. No. 2010-02-03]