Symposium on the Coase Theorem: Legal Fiction: The Place of the Coase Theorem in Law and Economics

1999 ◽  
Vol 15 (2) ◽  
pp. 209-233 ◽  
Author(s):  
Steven G. Medema
Keyword(s):  
Transaction Costs ◽  
Social Cost ◽  
Law And Economics ◽  
Coase Theorem ◽  
Normative Analysis ◽  
Legal Fiction

Modern law and economics received much of its impetus from Ronald Coase's analysis in ‘The Problem of Social Cost,’ and a goodly amount of that comes from the Coase theorem, which states that, absent transaction costs, externalities will be efficiently resolved through bargaining. The fact that the analysis that came to be codified in the Coase theorem was (intentionally) an exercise in pure fiction on Coase's part did not deter the erection of a substantial edifice of positive and normative analysis on this foundation, nor, for that matter, has subsequent elaboration of Coase's intent done anything to abate the interest in the theorem and its implications.

scholarly journals Land-locked: An Examination of Some of the Inefficiencies Affecting Transactions Involving Immovable Property

2006 ◽  
Vol 45 (4II) ◽  
pp. 1323-1342 ◽  
Author(s):  
Ahmad Rafay Alam
Keyword(s):  
Transaction Costs ◽  
Law And Economics ◽  
Coase Theorem ◽  
High Rate ◽  
Efficient Allocation ◽  
Allocation Of Resources ◽  
Natural Flow ◽  
One Year ◽  
The Cost ◽  
Stamp Duty

In the study of law and economics, the Coase Theorem posits that an efficient allocation of resources will result when transactions costs are zero.1 These “transaction costs” may be viewed as impediments to an efficient allocation of resources and can take many forms. For example, long distances between a prospective vendor and purchaser of property and a lack of communication facilities between them would impede even the best of intentions to enter into a bargain. Similarly, the cost of mobilising labour and materials might impede a property developer from pursuing a tender for civil works. In some cases, a high rate of Stamp Duty on transactions can result in the parties reconsidering their decision to enter into such bargains. To the extent this author can claim knowledge of economics, the Coase Theorem also suggests that transaction costs and inefficiencies hamper the natural flow of bargains, result in inefficient allocation of resources and thus impact the economy. Some transaction costs are small enough to ignore whereas some, imposed, for example, by the law, are unavoidable. In such cases, a mutual understanding between the parties may see the burden of these transaction costs shared or, in others, avoided altogether. For example, the statutory requirements that all leases purporting to grant a term in excess of one year or which reserve an annual rent must be registered and stamped2 often results, in owners of residential property granting indefinitely renewable leases of 11 months and thus avoiding such requirements.

A Coda to Coase

1997 ◽  
Vol 56 (2) ◽  
pp. 275-283
Author(s):  
Matthew H. Kramer
Keyword(s):  
Transaction Costs ◽  
Social Cost ◽  
Law And Economics ◽  
Classic Article

As anyone even noddingly familiar with law-and-economics can attest, the name of Ronald Coase has become associated with the vision of a world that is free of transaction costs. Such an association derives largely from Coase's classic article, “The Problem of Social Cost”. However, as should be recognised by anyone who peruses that article, its author's chief concern lies in taking account sustainedly of the presence and implications of transaction costs.

scholarly journals Economic Considerations of Legal Delimitation: Evidence from Judicial Verdicts in Bangladesh Courts

2021 ◽  
Vol 13 (3) ◽  
pp. 115-135
Author(s):  
Mohammad Dulal Miah ◽  
Mohammed Usman ◽  
Yasushi Suzuki
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Important Implication ◽  
Social Cost ◽  
Law And Economics ◽  
Transaction Cost Theory ◽  
Judicial Decision ◽  
Judicial Decisions ◽  
New Information ◽  
Economic Considerations

The literature on law and economics argues that economic considerations have an important implication for consistent and efficient legal practices. In line with this tradition, this paper aims to analyse legal verdicts through the lens of transaction cost to ascertain if judicial decision takes social cost into account. In so doing, the research draws upon the literature of transaction cost theory, which examines the implications of transaction cost for legal verdicts. Data for the analysis consist of legal verdicts collected from Bangladesh. The paper shows that judicial decisions are influenced by economic matters, especially social and transaction costs. When the issue of these costs is clear, judges take this into consideration in deciding who should own what rights. This research contributes to the literature of law and economics by providing new information, which is believed to help regulators, policymakers, and legal practitioners in deciding value-creating property rights.

From transaction costs to transaction value: Overcoming the frictional paradigm

2020 ◽  
pp. 51-81
Author(s):  
D. P. Frolov
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Path Dependence ◽  
Transaction Cost Economics ◽  
Cost Minimization ◽  
Low Cost ◽  
Coase Theorem ◽  
Transactional Analysis ◽  
Transaction Sector ◽  
Transaction Value

The transaction cost economics has accumulated a mass of dogmatic concepts and assertions that have acquired high stability under the influence of path dependence. These include the dogma about transaction costs as frictions, the dogma about the unproductiveness of transactions as a generator of losses, “Stigler—Coase” theorem and the logic of transaction cost minimization, and also the dogma about the priority of institutions providing low-cost transactions. The listed dogmas underlie the prevailing tradition of transactional analysis the frictional paradigm — which, in turn, is the foundation of neo-institutional theory. Therefore, the community of new institutionalists implicitly blocks attempts of a serious revision of this dogmatics. The purpose of the article is to substantiate a post-institutional (alternative to the dominant neo-institutional discourse) value-oriented perspective for the development of transactional studies based on rethinking and combining forgotten theoretical alternatives. Those are Commons’s theory of transactions, Wallis—North’s theory of transaction sector, theory of transaction benefits (T. Sandler, N. Komesar, T. Eggertsson) and Zajac—Olsen’s theory of transaction value. The article provides arguments and examples in favor of broader explanatory possibilities of value-oriented transactional analysis.

On a Fallacy in the Coase Theorem and the Theorem of Transaction Costs Substitution

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Steven N. S. Cheung
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Coase Theorem ◽  
Economic Institutions ◽  
General Version ◽  
Historical Account ◽  
Rent Dissipation

AbstractThis paper first presents a historical account of the origin of the Coase Theorem. It then elaborates its significance in explaining the working of economic institutions. After expounding the concepts of transaction cost and rent dissipation, it points out an error in the Coase Theorem. Lastly, the paper propounds the Theorem of Transaction Costs Substitution as an extended and general version of the Coase Theorem.

The Coase Theorem, the Nonempty Core, and the Legal Neutrality Principle

2019 ◽  
Vol 16 (1) ◽  
Author(s):  
Bertrand Crettez
Keyword(s):  
Resource Allocation ◽  
Transaction Costs ◽  
Cooperative Game ◽  
Coase Theorem ◽  
Pareto Optimal ◽  
Liability Rules ◽  
The Core ◽  
Optimal Allocations ◽  
Legal Position ◽  
Person Game

Abstract The Coase theorem states that where there are externalities and no transaction costs resource allocation is Pareto-optimal and independent of the stakeholders’ legal position. This result has been challenged many times. In the cooperative game approach to resource allocation, the refutation is made by constructing a three-person game which has an empty core under one set of liability rules—which implies that optimal allocations are coalitionally unstable–and a nonempty core under another set. In this example, however, the probability that the core is non-empty is rather high (5/6). Yet, even if coalitionally stable Pareto-optimal arrangements are likely, to establish the plain validity of the Coase theorem it must be shown that the legal neutrality statement also holds. We show that for the three-person cooperative game example mentioned above, the probability that the two assertions of the Coase theorem hold can be as low as 3/8.

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