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The Coase Theorems And The Economic Theory Of Markets And Law

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  • Cento G. Veljanovski

Abstract

Considerable controversy surrounds the COASE theorem despite the fact that it is generally accepted as valid both in the theory of externalities and the economic analysis of law. A major source of the controversy is the fact that there are a number of versions of the COASE theorem and definitions of transactions costs. It is argued that a proper understanding both of the competitive market model and transaction costs reveals that the COASE theorem is invalid and not part of standard market theory. It is further argued that transaction costs and information costs arising from market uncertainty provide a key to resolving many of the controversies that the theorem has given rise to and following from this that the primary economic function of law in bargaining situations is to increase transaction costs in order to reduce market uncertainty and strategic behaviour.

Suggested Citation

  • Cento G. Veljanovski, 1982. "The Coase Theorems And The Economic Theory Of Markets And Law," Kyklos, Wiley Blackwell, vol. 35(1), pages 53-74, February.
    • Handle: RePEc:bla:kyklos:v:35:y:1982:i:1:p:53-74
    DOI: 10.1111/j.1467-6435.1982.tb01215.x
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    Cited by:

    1. Zattler, Jürgen K., 1998. "Endogene Wachstumstheorie und wirtschaftspolitische Implikaktionen für Entwicklungsländer: The missing link," Discussion Papers in Development Economics 27, Justus Liebig University Giessen, Institute for Development Economics.
    2. Bingyuan Hsiung, 2004. "The Commonality Between Economics and Law," European Journal of Law and Economics, Springer, vol. 18(1), pages 33-53, July.
    3. Teodor Sedlarski & Mina Bazoteva, 2012. "Application of the Economic Analysis of Law to the Regulation of the Drug Retail Market in Bulgaria," Yearbook of the Faculty of Economics and Business Administration, Sofia University, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria, vol. 10(1), pages 153-175, March.
    4. Élodie Bertrand, 2006. "La thèse d'efficience du « théorème de Coase ». Quelle critique de la microéconomie ?," Revue économique, Presses de Sciences-Po, vol. 57(5), pages 983-1007.
    5. Elif Cemre Hazıroğlu & Semih Gökatalay, 2016. "Minimum resale price maintenance in EU in the aftermath of the US Leegin decision," European Journal of Law and Economics, Springer, vol. 42(1), pages 45-71, August.
    6. Korkut Erturk, 2016. "Asymmetric Power and Market Failure: Power Hazard in Exchange," Working Paper Series, Department of Economics, University of Utah 2016_02, University of Utah, Department of Economics.
    7. Siegmund, Uwe, 1997. "Warum Privatisierung? Eine Dogmengeschichte der Privatisierungstheorien," Kiel Working Papers 785, Kiel Institute for the World Economy (IfW Kiel).
    8. Elodie Bertrand, 2019. "Much ado about nothing? The controversy over the validity of the Coase theorem," Post-Print hal-03479468, HAL.
    9. Maeda, Yasuo, 1995. "Comment on "What is the Coase Theorem?" by Leonid Hurwicz," Japan and the World Economy, Elsevier, vol. 7(1), pages 75-78, May.
    10. Hurwicz, Leonid, 1995. "What is the Coase Theorem?," Japan and the World Economy, Elsevier, vol. 7(1), pages 49-74, May.
    11. J.A. den Hertog, 2010. "Review of economic theories of regulation," Working Papers 10-18, Utrecht School of Economics.

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