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A Limitation of the Coase Theorem When Applied to Negative Externalities

Author

Listed:
  • Aleksandar Kosuliev

    ("Angel Kanchev" University of Ruse)

Abstract

In his landmark article "The Problem of Social Cost" Ronald Coase criticizes the Pigouvian tradition of dealing with negative externalities and suggests that in the presence of transaction costs courts should give property rights to the party that can put them to more productive use. This suggestion however is based on a static concept of efficiency and the economy in the long term is not the totality of the static moments, analyzed independently. If we add more periods and more participants the uncertainty in the economic system will increase and dynamic efficiency will be lower.

Suggested Citation

  • Aleksandar Kosuliev, 2017. "A Limitation of the Coase Theorem When Applied to Negative Externalities," Economy and Economic Theory: Problems and Interactions, Conference Proceedings 2017, Department of Economics, University of Economics - Varna, issue 1, pages 163-173, December.
    • Handle: RePEc:vra:pr1712:y:2017:i:1:p:163-173
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    More about this item

    Keywords

    Coase; negative externalities; property rights;
    All these keywords.

    JEL classification:

    • A00 - General Economics and Teaching - - General - - - General

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