Hostname: page-component-586b7cd67f-dsjbd Total loading time: 0 Render date: 2024-11-23T16:46:11.376Z Has data issue: false hasContentIssue false
  • English
  • Français

DISPROVING THE COASE THEOREM?*

Published online by Cambridge University Press:  01 November 2007

ANDREW HALPIN
ANDREW HALPIN*
Affiliation:
Swansea University
Get access Rights & Permissions [Opens in a new window]

Abstract

Fascination with the Coase Theorem arises over its apparently unassailable counterintuitive conclusion that the imposition of legal liability has no effect on which of two competing uses of land prevails, and also over the general difficulty in tying down an unqualified statement of the theorem. Instead of entering the debate over what exactly the theorem holds, this article suggests that the core of Coase's reasoning is flawed and to the extent that any version of the theorem relies upon this reasoning it can be disproved. The article commences by modelling the nature of the counter-intuitive thrust to the Coase Theorem, which is used to trace the development of Coase's reasoning, and ultimately to expose the flaw it contains. The heart of the article comprises the allegation of an error made by Coase when he transferred his core argument to the context of economic rents. Ancillary observations are made on the relationship between the Coasean analysis of characteristically legal problems and the conditions of general market equilibrium, and the theoretical status of Law-and-Economics.

Type
Essay
Information
Economics & Philosophy , Volume 23 , Issue 3 , November 2007 , pp. 321 - 341
Copyright
Copyright © Cambridge University Press 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Adler, M. and Posner, E., eds. 2001. Cost-Benefit Analysis: Legal, Economic, and Philosophical Perspectives. Chicago, University of Chicago Press.Google Scholar
Aslanbeigui, N. and Medema, S.. 1998. Beyond the dark clouds: Pigou and Coase on social cost. History of Political Economy 30:601–26.Google Scholar
Bouckaert, B. and De Geest, G., eds. 2000. Encyclopedia of Law and Economics, Volume I: The History and Methodology of Law and Economics. Edward Elgar.Google Scholar
Calabresi, G. 1991. The pointlessness of Pareto: Carrying Coase further. Yale Law Journal 100:1211–37.Google Scholar
Campbell, D. and Picciotto, S.. 1998. Exploring the interaction between law and economics: the limits of formalism. Legal Studies 18:249–78.Google Scholar
Coase, R. H. 1960. The problem of social cost. Journal of Law and Economics 3:1–44.Google Scholar
Coase, R. H. 1988a. The Firm, the Market, and the Law. Chicago, University of Chicago Press.Google Scholar
Coase, R. H. 1988b. Notes on the problem of social cost. In Coase 1988a.Google Scholar
Coase, R. H. 1996. Law and economics and A.W. Brian Simpson. Journal of Legal Studies 25:103–19.CrossRefGoogle Scholar
Coleman, J. 1988. Markets, Morals and the Law. Cambridge, Cambridge University Press.Google Scholar
Cooter, R. 1987. Entry on Coase Theorem. In Eatwell, Milgate and Newman, (eds.) 1987.Google Scholar
Cooter, R., and Ulen, T.. 2004. Law and Economics, 4th edn.Pearson Addison Wesley.Google Scholar
de Meza, D. 1998. Entry on Coase theorem. In Newman, (ed.) 1998.Google Scholar
Demsetz, H. 1998. Entry on Coase. In Newman, (ed.) 1998.Google Scholar
Eastman, W. 1997. Telling alternative stories: Heterodox versions of the Prisoners’ dilemma, the Coase theorem, and supply-demand equilibrium. Connecticut Law Review 29:727–825.Google Scholar
Eatwell, J., Milgate, M. and Newman, P., eds. 1987. 1 The New Palgrave: A Dictionary of Economics. Macmillan.CrossRefGoogle Scholar
Ellickson, R. C. 1991. Order Without Law: How Neighbors Settle Disputes. Harvard, Harvard University Press.Google Scholar
Farber, D. 1997. Parody lost/Pragmatism regained: The ironic history of the Coase theorem. Virginia Law Review 83:397–428.Google Scholar
Fletcher, G. 1996. Basic Concepts of Legal Thought. Oxford, Oxford University Press.Google Scholar
Halpin, A. 2000. Clamshells or Bedsteads? Oxford Journal of Legal Studies 20:353–66.Google Scholar
Halpin, A. 2001. Reasoning with Law. Oxford, Hart Publishing.Google Scholar
Huigens, K. 2001. Law, economics, and the Skeleton of Value fallacy. California Law Review 89:537–68.Google Scholar
Jung, C., Krutila, K., Viscusi, W. K. and Boyd, R.. 1995. The Coase Theorem in a rent-seeking society. International Review of Law and Economics 15:259–68.CrossRefGoogle Scholar
Katz, A. 1998. Foundations of the Economic Approach to Law. Foundation Press.Google Scholar
Markovits, R. 1993. A constructive critique of the traditional definition and use of the concept of “The effect of a choice on allocative (economic) efficiency”: Why the Kaldor-Hicks test, the Coase theorem, and virtually all law-and-economics arguments are wrong. University of Illinois Law Review 1993: 485–533.Google Scholar
Markovits, R. 2001. On the relevance of economic efficiency conclusions. Florida State University Law Review 29:1–54.Google Scholar
Medema, S. 1994. Ronald H. Coase. Basingstoke, Macmillan.CrossRefGoogle Scholar
Medema, S. 1997. Comment: The Coase theorem, rent seeking, and the forgotten footnote. International Review of Law and Economics 17:177–8.CrossRefGoogle Scholar
Medema, S. and Zerbe, R.. 2000. Entry on the Coase theorem. In Bouckaert, and De Geest, (eds.) 2000.Google Scholar
Mercuro, N. and Medema, S.. 1997. Economics and the Law. Princeton, Princeton University Press.Google Scholar
Newman, P., ed. 1998. The New Palgrave Dictionary of Economics and the Law. Basingstoke, Macmillan.Google Scholar
Posin, D. 1999. The error of the Coase theorem: of Judges Hand and Posner and Carrol Towing. Tulane Law Review 74:629–58.Google Scholar
Posner, R. 1995. Overcoming Law. Harvard, Harvard University Press.Google Scholar
Posner, R. 2001. Cost-benefit analysis: definition, justification, and comment on conference papers. In Adler, and Posner, (eds.) 2001.Google Scholar
Regan, D. 1972. The problem of social cost revisited. Journal of Law and Economics 15:427–37.CrossRefGoogle Scholar
Samuels, W. 1974. The Coase theorem and the study of law and economics. Natural Resources Journal 14:1–33.Google Scholar
Schroeder, J. 1998. The end of the market: A psychoanalysis of law and economics. Harvard Law Review 112:483–558.CrossRefGoogle Scholar
Schwab, S. 1989. Coase defends Coase: why lawyers listen and economists do not. Michigan Law Review 87:1171–98.Google Scholar
Shavell, S. 2004. Foundations of Economic Analysis of Law. Harvard, Belknap Press.Google Scholar
Simpson, A. W. B. 1996. Coase v. Pigou reexamined. Journal of Legal Studies 25:53–97.Google Scholar
Stigler, G. 1966. The Theory of Price, 3rd. edn. Basingstoke, Macmillan.Google Scholar
Stigler, G. 1989. Two notes on the Coase theorem. Yale Law Journal 99:631–3.Google Scholar
Usher, D. 1998. The Coase theorem is tautological, incoherent or wrong. Economics Letters 61:3–11.Google Scholar