IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v32y2012i1p129-134.html
   My bibliography  Save this article

The Coase theorem reconsidered: The role of alternative activities

Author

Listed:
  • Kuechle, Graciela
  • Rios, Diego

Abstract

The main statement put forth by Coase in his essay on the problem of social cost (Coase, 1960) is that given zero transactions costs, the assignment of entitlements to perform actions that cause negative externalities does not prevent the agents from reaching an efficient outcome through bargaining. Coase's argument decisively depends upon the agents having resources to bargain. Since rents, understood as the return to a certain activity in excess of its opportunity cost, are natural providers of such resources, they play a vital role in the logic of the Coase theorem. It has been recently argued (Halpin, 2007) not only that Coase provides an incomplete analysis of rents but also that he is committed to a flawed argument over rents by neglecting the role of alternative activities. This paper recasts Coase's argument in the presence of rents and alternative activities to show that the theorem can be vindicated.

Suggested Citation

  • Kuechle, Graciela & Rios, Diego, 2012. "The Coase theorem reconsidered: The role of alternative activities," International Review of Law and Economics, Elsevier, vol. 32(1), pages 129-134.
  • Handle: RePEc:eee:irlaec:v:32:y:2012:i:1:p:129-134
    DOI: 10.1016/j.irle.2011.10.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0144818811000639
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.irle.2011.10.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    2. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
    3. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    4. Halpin, Andrew, 2007. "Disproving The Coase Theorem?," Economics and Philosophy, Cambridge University Press, vol. 23(3), pages 321-341, November.
    5. W. Mark Crain & David Saurman & Robert D. Tollison, 1978. "The Coase Theorem and Quasi-Rents: Correcting the Record," Public Finance Review, , vol. 6(2), pages 259-262, April.
    6. Richard McKelvey & Talbot Page, 2000. "An Experimental Study of the Effect of Private Information in the Coase Theorem," Experimental Economics, Springer;Economic Science Association, vol. 3(3), pages 187-213, December.
    7. Hoffman, Elizabeth & Spitzer, Matthew L, 1982. "The Coase Theorem: Some Experimental Tests," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 73-98, April.
    8. Shapiro, David L., 1974. "A note on rent and the Coase theorem," Journal of Economic Theory, Elsevier, vol. 7(1), pages 125-128, January.
    9. Usher, Dan, 1998. "The Coase theorem is tautological, incoherent or wrong," Economics Letters, Elsevier, vol. 61(1), pages 3-11, October.
    10. Richard A. Tybout, 1972. "Pricing Pollution and Other Negative Externalities," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 252-266, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pan, Yuling & Dong, Feng, 2023. "Green finance policy coupling effect of fossil energy use rights trading and renewable energy certificates trading on low carbon economy: Taking China as an example," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 658-679.
    2. Steven G. Medema, 2020. "The Coase Theorem at Sixty," Journal of Economic Literature, American Economic Association, vol. 58(4), pages 1045-1128, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Steven G. Medema, 2020. "The Coase Theorem at Sixty," Journal of Economic Literature, American Economic Association, vol. 58(4), pages 1045-1128, December.
    2. Elodie Bertrand, 2019. "Much ado about nothing? The controversy over the validity of the Coase theorem," Post-Print hal-03479468, HAL.
    3. 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.
    4. repec:ebl:ecbull:v:3:y:2007:i:68:p:1-7 is not listed on IDEAS
    5. Hennlock, Magnus, 2006. "Coasean Bargaining Games with Stochastic Stock Externalities," Working Papers in Economics 229, University of Gothenburg, Department of Economics.
    6. Akee, Randall K. Q., 2006. "Checkerboards and Coase: Transactions Costs and Efficiency in Land Markets," IZA Discussion Papers 2438, Institute of Labor Economics (IZA).
    7. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    8. Oren Bar-Gill & Christoph Engel, 2016. "Bargaining in the Absence of Property Rights: An Experiment," Journal of Law and Economics, University of Chicago Press, vol. 59(2), pages 477-495.
    9. Yalcintas, Altug, 2010. "The ‘Coase Theorem’ vs. Coase theorem proper: How an error emerged and why it remained uncorrected so long," MPRA Paper 37936, University Library of Munich, Germany.
    10. Yannick Gabuthy & Nicolas Jacquemet, 2013. "Analyse économique du droit et méthode expérimentale," PSE-Ecole d'économie de Paris (Postprint) halshs-00746617, HAL.
    11. Charness, Gary & Frechette, Guillaume R. & Qin, Cheng-Zhong, 2007. "Endogenous transfers in the Prisoner's Dilemma game: An experimental test of cooperation and coordination," Games and Economic Behavior, Elsevier, vol. 60(2), pages 287-306, August.
    12. repec:hal:wpaper:halshs-00746617 is not listed on IDEAS
    13. Elodie Bertrand, 2014. "Allowing exchanges over externalities: From ban to obligation [Autorisation à l'échange sur des externalités: De l'interdiction à l'obligation]," Post-Print hal-03507657, HAL.
    14. Andrew Halpin, 2011. "Coase’s world and Coase’s blackboard," European Journal of Law and Economics, Springer, vol. 31(1), pages 91-109, February.
    15. Moszoro Marian W., 2016. "Coasean Quality of Regulated Goods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-13, October.
    16. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
    17. Christine Jolls, 2007. "Behavioral Law and Economics," NBER Working Papers 12879, National Bureau of Economic Research, Inc.
    18. Altug Yalcintas, 2013. "The Problem of Epistemic Cost: Why Do Economists Not Change Their Minds (About the “Coase Theorem”)?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(5), pages 1131-1157, November.
    19. Jason Shogren & Randy Moffett & Michael Margolis, 2002. "Coasean bargaining with nonconvexities," Applied Economics Letters, Taylor & Francis Journals, vol. 9(15), pages 971-977.
    20. Tyler Prante & Robert P. Berrens & Jennifer A. Thacher, 2007. "Evaluating coasean bargaining experiments with meta-analysis," Economics Bulletin, AccessEcon, vol. 3(68), pages 1-7.
    21. Graff Zivin, Joshua & Small, Arthur A., 2003. "Risk sharing in Coasean contracts," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 394-415, March.
    22. Hervé Crès, 1996. "Symmetric Smooth Consumption Externalities," SciencePo Working papers Main hal-03598166, HAL.

    More about this item

    Keywords

    Allocative efficiency; Coase theorem; Rents; Externalities; D61; D62;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:32:y:2012:i:1:p:129-134. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/irle .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.