Coasean Theory of Property Rights and Law Revisited: A Critical Inquiry (original) (raw)

Coasean Theory of Property Rights and Law Revisited: A Critical Inqui

Ronald Coase's famous Theorem states that externalities — third-party effects of transactions that undermine the supposed optimality of competitive equilibrium — do not need to be corrected by active government policy, as in the classical presentation by A. C. Pigou, if there are complete markets in property rights. This Theorem, however, is inherently flawed, as revealed by “internal” or “immanent” critique of its assumptions. It thus fails, even on its own terms. Beyond this, however, a more radical critique, which foregrounds issues of social structure, social relations, power and conflict, forms the basis for a comprehensive analysis of (capitalist) property rights. This radical analysis of the Coase Theorem and the debate spawned by it has implications for the entire field of “law and economics” studies, and for its central notion that legal doctrine can be based on any set of pure efficiency criteria.

Property rights, the Coase Theorem and informality

Research Handbook on Austrian Law and Economics

Austrian economists have had a bivalent view of the foundational contributions of Ronald Coase to modern law and economics, particularly on what was later called the "Coase Theorem" (Coase, 1960), and a much more critical view on the following "efficiency" view of law. A benign interpretation would stress his critique of general equilibrium theorizing, the need to consider the institutional framework when transactions costs are sufficiently high to prevent bilateral negotiations and his rejection of Pigou's policy proposals of subsidies and taxes to solve problems of positive and negative externalities (Boettke, 1997). In this view, Coase is a pioneer and a main contributor to the now flourishing concern on the role of institutions and, with that, joining a long Austrian involvement on the subject, already present in Menger's work. This view also stresses the importance of voluntary solutions to problems of negative externalities, not considered in Pigou's view. A second interpretation, which may not exclude the first, rejects a view on the "reciprocal nature of harm" and, most of all, his proposal that under the presence of transaction costs "what has to be decided is whether the gain from preventing the harm is greater than the loss which would be suffered as a result of stopping the action which produces the harm" (Coase, p. 27) i , with the corresponding advice to judges, probably coming from some Coase's followers than from Coase himself, to apportion rights following a cost and benefit analysis in a way to maximize the

Coase and Demsetz on Private Property Rights

In his seminal work, "The Problem of Social Cost," Coase held that in cases of private property right disputes involving what have been called externalities, "with costless market transactions, the decision of the courts concerning liability for damage would be without effect on the allocation of resources." I shall try to show that this view is mistaken because it does not take account of psychic income. I shall then consider what can only be considered immoral implications Demsetz draws from Coase's view of property.

Coase Theorem and Philosophical Foundations of Law and Economics, The

Masaryk UJL & Tech., 2008

In this paper I will claim that methodology of law and economics should be changed from adopting economic analysis of law, namely implementing price theory and welfare economics (economization of law) to the scientific efforts aiming at an inter-disciplinary project embracing law and ...

Coasian and modern property rights economics

Journal of Institutional Economics, 2014

Among the many seminal contributions of Ronald Coase, founding property rights economics is a truly major one. This approach impacted a number if fields in economics in particularly the 1960s and 1970s, but gradually lost influence. What is called property rights economics in modern economics, mainly originated by Oliver Hart, is very different from the original property rights economics of Coase, Demsetz, Alchian, Cheung, Umbeck, Barzel, etc. in terms of analytical style and explanatory scope. Based on our earlier work on the subject , we argue that the change from Mark I to Mark II property rights economics led to Kuhnian loss of content. This is related to the strong assumptions concerning the definition and enforcement of ownership rights made in the latter approach which leads to many real life institutions and governance arrangements being excluded from consideration.

The Origins, Nature, and Content of the Right to Property: Five Economic Solitudes

The thesis of this article is that the now extensive contemporary literature on the economics of property rights has generated more heat than light. Economists have invoked at least five distinct theories of ownership or property rights in their work. Unfortunately, authors frequently fail to acknowledge the existence of competing theories of property rights that stand as conceptual rivals to the theory that they, often implicitly, invoke. Nowhere is this problem more evident than in the literature on regulatory takings, a literature that has a justifiable reputation for its inconsistent conclusions. Other fields in which theories of property rights play an important role include intellectual property, the economics of contracts, competition analysis and policy, externalities, and the economics of information. This article compares and evaluates five competing theories of property rights that have been advanced and used by economists: classical liberalism, utilitarianism, legal positivism, pragmatism, and modern libertarianism. These theories present divergent accounts of the origin and the nature of ownership claims. They also conceptualize the evolution of ownership institutions as well as ownership patterns quite differently. There are also important differences in incentives that exist under institutional regimes based on each theory.

Calabresi,‘Law and Economics’ and the Coase Theorem

2010

Abstract: In this paper, we show that, in 1961 and before he had read" The Problem of Social Cost", Calabresi reached exactly the same conclusions as the one reached by Coase and summarized by Stigler as the" Coase theorem" but he believed that this result was valid only in the theoretical world of the economists. We also analyze how Calabresi's thought evolved, in particular including transaction costs in his reasoning, but nonetheless remained faithful to his conclusions about the practical validity of the Coase theorem.