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Coase Defends Coase: Why Lawyers Listen and Economists Do Not
Michigan Law Review Volume 87 Issue 6 1989 Coase Defends Coase: Why Lawyers Listen and Economists Do Not Stewart Schwab Cornell Law School Follow this and additional works at: https://repository.law.umich.edu/mlr Part of the Business Organizations Law Commons, and the Law and Economics Commons Recommended Citation Stewart Schwab, Coase Defends Coase: Why Lawyers Listen and Economists Do Not, 87 MICH. L. REV. 1171 (1989). Available at: https://repository.law.umich.edu/mlr/vol87/iss6/3 This Review is brought to you for free and open access by the Michigan Law Review at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Michigan Law Review by an authorized editor of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. COASE DEFENDS COASE: WHY LAWYERS LISTEN AND ECONOMISTS DO NOT Stewart Schwab* THE FIRM THE MARKET AND THE LAW. By Ronald Coase. Chi cago: University of Chicago Press. 1988. Pp. vii, 217. , $29.95. In The Firm the Market and the Law, Ronald Coase has collected five of his major articles and has newly written a thirty~one-page intro duction and twenty-nine-page reply to his critics:. The'book is a slim one, but Coase's resume has always shown quality rather than sheer output. The book is certain to attract attentioI.I: when the founding guru of law and economics responds .to his critics, people will listen. And it is worth listening, for we can gain insight into the Coas~ Theo rem by seeing the tacks Coase takes in defending himself. -
Coase Theorem” Asserts That in the Absence of Transaction Costs, Parties to an Externality Will Bargain to an Efficient Outcome
Abstract The \Coase theorem" asserts that in the absence of transaction costs, parties to an externality will bargain to an efficient outcome. It also claims that the resulting level of externality-generating is inde- pendent of initial assignment of rights. It is well-known that Coase's second claim is true if utility is quasi-linear so that the valuation of externalities does not depend on wealth. This paper finds a class of preferences for which Coase's second claim is true when there are wealth effects. It presents a necessary and sufficient condition for Coase's second claim and discusses applications of this result. 1 When Was Coase Right? Ted Bergstrom∗ Economics Department, University of California Santa Barbara [email protected] June 21, 2017 ∗This paper is dedicated to the memory of Richard Cornes and Leo Hurwicz, with whom it was my privilege to share thoughts and puzzlements about this topic. I am grateful to Di Wang of UCSB for useful discussions and for steering me to the Chipman-Tian paper, and also to Guoqiang Tian for helpful discussions. 1 Ronald Coase [7] argued that the amount of damage that one party causes to another typically depends on the actions of both parties. Coase maintained that, regardless of the way that the law assigns liability, if the perpetrator and recipient are able to bargain freely, they are likely to reach an efficient outcome. Coase's paper consists of a series of examples and insightful discussions. He made no claims of a formal theorem based on explicit assumptions. The term \Coase Theorem" seems to originate with George Stigler, who explained Coase's ideas in his textbook The Theory of Price [13], pp 110-114. -
The Contribution of Douglass North to New Institutional Economics Claude Ménard, Mary M
The Contribution of Douglass North to New Institutional Economics Claude Ménard, Mary M. Shirley To cite this version: Claude Ménard, Mary M. Shirley. The Contribution of Douglass North to New Institutional Economics. Sebastian Galani, Itai Sened. Institutions, Property Rights and Economic Growth: The legacy of Douglass North, Cambridge University Press, pp.11-29, 2014, 9781107041554. 10.1017/CBO9781107300361.003. hal-01315473 HAL Id: hal-01315473 https://hal.archives-ouvertes.fr/hal-01315473 Submitted on 13 May 2016 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. THE CONTRIBUTION OF DOUGLASS NORTH TO NEW INSTITUTIONAL ECONOMICS Claude Ménard And Mary M. Shirley Chap. 1, pp. 11-29 In: INSTITUTIONS, PROPERTY RIGHTS, and ECONOMIC GROWTH. The Legacy of Douglass Nortrh. S. Galiani and I. Sened (eds.), Cambridge: Cambridge University Press 2014 2 The Contribution of Douglass North to New Institutional Economics By Claude Ménard and Mary M. Shirley 1 Abstract Douglass North, along with Ronald Coase, Elinor Ostrom, and Oliver Williamson, transformed the early intuitions of new institutional economics into powerful conceptual and analytical tools that spawned a robust base of empirical research. NIE arose in response to questions not well explained by standard neoclassical models, such as make or buy? Or, why rich or poor? Today NIE is a success story by many measures: four Nobel laureates in under 20 years, increasing penetration of mainstream journals, and significant impact on major policy debates from anti-trust law to development aid. -
Ronald H. Coase [Ideological Profiles of the Economics Laureates] Daniel B
Ronald H. Coase [Ideological Profiles of the Economics Laureates] Daniel B. Klein Econ Journal Watch 10(3), September 2013: 299-307 Abstract Ronald H. Coase is among the 71 individuals who were awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel between 1969 and 2012. This ideological profile is part of the project called “The Ideological Migration of the Economics Laureates,” which fills the September 2013 issue of Econ Journal Watch. Keywords Classical liberalism, economists, Nobel Prize in economics, ideology, ideological migration, intellectual biography. JEL classification A11, A13, B2, B3 Link to this document http://econjwatch.org/file_download/719/CoaseIPEL.pdf IDEOLOGICAL PROFILES OF THE ECONOMICS LAUREATES Buchanan, James M. 2007. Economics from the Outside In. College Station, Tex.: Texas A&M University Press. Buchanan, James M. 2009. Interview by Karen Ilse Horn. In Roads to Wisdom: Conversations with Ten Nobel Laureates in Economics by Horn, 85-109. Cheltenham, UK: Edward Elgar. Buchanan, James M., and Roger D. Congleton. 1998. Politics By Principle, Not Interest: Toward Nondiscriminatory Democracy. Cambridge, UK: Cambridge University Press. Buchanan, James M., and Gordon Tullock. 1962. The Calculus of Consent: Logical Foundations of Constitutional Democracy. Ann Arbor, Mich.: University of Michigan Press. Gaus, Gerald, and Shane D. Courtland. 2011. Liberalism. In The Stanford Encyclopedia of Philosophy, Spring 2011 ed., ed. Edward N. Zalta. Center for the Study of Language and Information, Stanford University (Stanford, Calif.). Link Hayek, F. A. 1973. Law, Legislation and Liberty: Rules and Order. London: Routledge. Henderson, David R. 1999. How Three Economists Switched from Socialist to Pro-Free Market: An Exploration in Oral History. -
The Theory of the Firm and the Theory of the International Economic Organization: Toward Comparative Institutional Analysis Joel P
Northwestern Journal of International Law & Business Volume 17 Issue 1 Winter Winter 1997 The Theory of the Firm and the Theory of the International Economic Organization: Toward Comparative Institutional Analysis Joel P. Trachtman Follow this and additional works at: http://scholarlycommons.law.northwestern.edu/njilb Part of the International Trade Commons Recommended Citation Joel P. Trachtman, The Theory of the Firm and the Theory of the International Economic Organization: Toward Comparative Institutional Analysis, 17 Nw. J. Int'l L. & Bus. 470 (1996-1997) This Symposium is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons. The Theory of the Firm and the Theory of the International Economic Organization: Toward Comparative Institutional Analysis Joel P. Trachtman* Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire. 1 While the kind of close comparative institutional analysis which Coase called for in The Nature of the Firm was once completely outside the universe of mainstream econo- mists, and remains still a foreign, if potentially productive enterrise for many, close com- parative analysis of institutions is home turf for law professors. Hierarchical arrangements are being examined by economic theorists studying the or- ganization of firms, but for less cosmic purposes than would be served3 by political and economic organization of the production of international public goods. I. INTRODUCrION: THE PROBLEM Debates regarding the competences and governance of interna- tional economic organizations such as the World Trade Organization * Associate Professor of International Law, The Fletcher School of Law and Diplomacy, Tufts University. -
Appropriation, Violent Enforcement and Transaction Costs: a Critical Survey
Appropriation, violent enforcement and transaction costs : a critical survey Mehrdad Vahabi To cite this version: Mehrdad Vahabi. Appropriation, violent enforcement and transaction costs : a critical survey. Public Choice, Springer Verlag, 2011, 147 (1), pp.227-253. 10.1007/s11127-010-9721-7. hal-00629109 HAL Id: hal-00629109 https://hal.archives-ouvertes.fr/hal-00629109 Submitted on 5 Oct 2011 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Public Choice DOI 10.1007/s11127-010-9721-7 Appropriation, violent enforcement, and transaction costs: a critical survey Mehrdad VAHABI (University of Paris 8) Abstract This paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach. It has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that Coaseian bargaining can be extended to any institutional scenario, i.e., voluntary as well as coercive exchange. However, voluntary transactions cannot capture the logic of coercive power. This means that the assumption of an efficient political market is not valid, and that the “Political Coase Theorem” lacks the logical consistency to provide a cornerstone for political theory. -
The Economics of Climate Change C 175 ‐ Christian Traeger Part 3: Policy Instruments Continued
The Economics of Climate Change –C 175 The Economics of Climate Change C 175 ‐ Christian Traeger Part 3: Policy Instruments continued Bargaining (Coase) Spring 09 –UC Berkeley – Traeger 3 Instruments 10 The Economics of Climate Change –C 175 Bargaining: the Coase Theorem Ronald Coase (Nobel Price 1991) sees externalities as arising through the absence of property rights: pollution occurs when property rights are ill‐defined. If ppproperty rights are well‐defined, side of market without rights has to compensate other side: If atmosphere is a free public good, those who suffer from emissions have to (buy some of the rights from) emitters If agents have right to have clean environment, potential polluters have to compensate (buy some of the rights from) ‘consumers’ of clean environment Spring 09 –UC Berkeley – Traeger 3 Instruments 11 The Economics of Climate Change –C 175 Bargaining: the Coase Theorem Coase Theorem, Part 1 In a competiiitive economy wihith complete ifinformat ion and zero transaction costs, the allocation of resources will be Pareto‐efficient if all property rights are assigned. The Coase Theorem proposes that economic agents will solve externality problems without intervention, simpyply by assigggning property rights Legal rules of entitlement = property rights determine ownership in the economy... …and determine the direction of compensating payments if property right is violated. Spring 09 –UC Berkeley – Traeger 3 Instruments 12 The Economics of Climate Change –C 175 Example: Introducing property rights Example: -
0530 New Institutional Economics
0530 NEW INSTITUTIONAL ECONOMICS Peter G. Klein Department of Economics, University of Georgia © Copyright 1999 Peter G. Klein Abstract This chapter surveys the new institutional economics, a rapidly growing literature combining economics, law, organization theory, political science, sociology and anthropology to understand social, political and commercial institutions. This literature tries to explain what institutions are, how they arise, what purposes they serve, how they change and how they may be reformed. Following convention, I distinguish between the institutional environment (the background constraints, or ‘rules of the game’, that guide individuals’ behavior) and institutional arrangements (specific guidelines designed by trading partners to facilitate particular exchanges). In both cases, the discussion here focuses on applications, evidence and policy implications. JEL classification: D23, D72, L22, L42, O17 Keywords: Institutions, Firms, Transaction Costs, Specific Assets, Governance Structures 1. Introduction The new institutional economics (NIE) is an interdisciplinary enterprise combining economics, law, organization theory, political science, sociology and anthropology to understand the institutions of social, political and commercial life. It borrows liberally from various social-science disciplines, but its primary language is economics. Its goal is to explain what institutions are, how they arise, what purposes they serve, how they change and how - if at all - they should be reformed. This essay surveys the wide-ranging and rapidly growing literature on the economics of institutions, with an emphasis on applications and evidence. The survey is divided into eight sections: the institutional environment; institutional arrangements and the theory of the firm; moral hazard and agency; transaction cost economics; capabilities and the core competence of the firm; evidence on contracts, organizations and institutions; public policy implications and influence; and a brief summary. -
Markets, Firms and Property Rights a Celebration of the Research of Ronald Coase
Markets, Firms and Property Rights A Celebration of the Research of Ronald Coase Friday, December 4, and Saturday, December 5, 2009 University of Chicago Law School Auditorium This Conference brings together a group of scholars to honor the life and research of Ronald Coase. 2009 marks the 50th anniversary of the publication of Coase’s seminal paper on the Federal Communications Commission. 2010 marks the 50th anniversary of the publication of his paper on “The Problem of Social Cost,” and his 100th birthday. The presentations on this occasion cover specific topics on which Coase’s work has exerted profound influence, including such areas as telecommunications policy, airline regulation and development, environmental economics, economic development, organization of the firm, and general discussions of the questions of transactions costs and social rationality to which he has contributed so much. With Special Thanks The Conference is being organized by Richard A. Epstein of the University of Chicago, Thomas Hazlett of George Mason University, and Roger Noll and Greg Rosston of Stanford University. These papers shall be published in special issues of the Journal of Law and Economics and the Journal of Legal Studies. The public is invited. For additional information, please visit http://iep.gmu.edu/CoaseConference.php. Sponsors John M. Olin Program in Law and Economics at the University of Chicago Law School Stanford Institute for Economic Policy Research Information Economy Project at George Mason University Ewing Marion Kauffman Foundation Milton Friedman Institute for Research in Economics George J. Stigler Center for the Study of the Economy and the State China Center for Economic Research Lynde and Harry Bradley Foundation Participants Gary Becker Zhimin Liao Omri Ben-Shahar Gary Libecap Lee Benham Thomas Merrill Xiaofang Chen Roger Noll Lennon H.T. -
Economica Coase Lecture Reference Points and the Theory of the Firm
Economica (2008) 75, 404–411 doi:10.1111/j.1468-0335.2007.00659.x Economica Coase Lecture Reference Points and the Theory of the Firm n By OLIVER HART Harvard University Final version received 11 September 2007. I argue that it has been hard to make progress on Coase’s theory of the firm agenda because of the difficulty of formalizing haggling costs. I propose an approach that tries to move things forward using the idea of aggrievement costs, and apply it to the question of whether a transaction should be placed inside a firm (in-house production) or in the market place (outsourcing). INTRODUCTION Let me begin by saying that it has been a great pleasure to write this paper for two reasons. First, I am a great admirer of Ronald Coase and his work, which has had an enormous influence on me. Second, I take as my starting-point Coase’s 1937 paper on the nature of the firm, which Coase began while he was an undergraduate at LSE and published in Economica a few years later when he was on the staff. I will divide the paper into two parts. In the first I will discuss Coase’s 1937 paper and what followed; one of my themes will be that it has been quite difficult to make progress on the Coasian agenda. In the second part I will turn to some recent work (with John Moore) on contracts as reference points, and argue that this may be helpful in moving things along. Not surprisingly, this part of the paper is preliminary and speculative. -
The Essential RONALD COASE
The Essential RONALD COASE by L. Lynne Kiesling Fraser Institute d www.fraserinstitute.org The Essential Ronald Coase by L. Lynne Kiesling Fraser Institute www.fraserinstitute.org 2021 www.fraserinstitute.org d Fraser Institute d iii Copyright © 2021 by the Fraser Institute. All rights reserved. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. The author of this publication has worked independently and opinions expressed by her are, therefore, her own, and do not necessarily reflect the opinions of the Fraser Institute or its supporters, directors, or staff. This publication in no way implies that the Fraser Institute, its directors, or staff are in favour of, or oppose the passage of, any bill; or that they support or oppose any particular political party or candidate. Printed and bound in Canada Cover design and artwork Bill C. Ray ISBN 978-0-88975-644-1 Contents Introduction / 1 1 Institutions, Property Rights, and Transaction Costs / 5 2 Why Do Firms Exist? / 9 3 Resolving Disputes: The Problem of Social Cost / 19 4 Applied Transaction Cost Economics: Spectrum Allocation / 27 5 Applied Transaction Cost Economics: Emission Permit Trading / 33 6 Coase and the Lighthouse in Economics / 41 7 Problems of Monopoly / 45 8 Conclusion / 53 Works Cited and Suggestions for Further Reading / 55 Publishing information / 61 Author’s acknowledgments / 62 About the author / 62 Publisher’s acknowledgments / 62 Supporting the Fraser Institute / 63 Purpose, funding, and independence / 63 About the Fraser Institute / 64 Editorial Advisory Board / 65 Fraser Institute d www.fraserinstitute.org Introduction: Who Was Ronald Coase? Ronald Coase was one of the most influential economists of the 20th century, and one of the most unusual. -
Coase and the Courts: Economics for the Common Man Barbara Ann White University of Baltimore School of Law, [email protected]
University of Baltimore Law ScholarWorks@University of Baltimore School of Law All Faculty Scholarship Faculty Scholarship 3-1987 Coase and the Courts: Economics for the Common Man Barbara Ann White University of Baltimore School of Law, [email protected] Follow this and additional works at: http://scholarworks.law.ubalt.edu/all_fac Part of the Law and Economics Commons Recommended Citation Coase and the Courts: Economics for the Common Man, 72 Iowa L. Rev. 577 (1987) This Article is brought to you for free and open access by the Faculty Scholarship at ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion in All Faculty Scholarship by an authorized administrator of ScholarWorks@University of Baltimore School of Law. For more information, please contact [email protected]. Coase and the Courts: Economics for the Common Man Barbara White* INTRODUCTION The arguments collectively known as the Coase Theorem were first presented by R.H. Coase, an economist,l in his 1960 paper entitled The Problem of Social Cost.2 Based on the conclusions of that "theorem,"3 Coase criticizes the prevailing judicial policy of resolving legal disputes on the basis that businesses should "internalize" costs, that is, bear the indirect social costs associated with the production of goods and services.4 He argues the automatic application of this internalization policy often leads to economic inefficiency rather than to the maximization of efficiency, a goal which the judicial policy purports to promote. As an alternative, Coase claims that a different rule, one based on maximizing the total product of the parties to the dispute, would lead society closer to economic efficiency.s Over the last twenty-five years, the Coase Theorem as well as Coase's policy recommendation (referred to here as the total product rule) have fostered considerable debate both in economics and legal literature.