Hostname: page-component-788cddb947-2s2w2 Total loading time: 0 Render date: 2024-10-10T19:38:38.988Z Has data issue: false hasContentIssue false

‘A magnificent business prospect . . .’ the Coase theorem, the extortion problem, and the creation of Coase theorem worlds

Published online by Cambridge University Press:  24 June 2014

STEVEN G. MEDEMA*
Affiliation:
Department of Economics, University of Colorado Denver, CB 181, Denver, CO 80217-3364, USA

Abstract

The Coase theorem, circa the 1970s, had no settled meaning or content; instead, that meaning and content was created – and in differing ways – by the modeling choices of scholars who attempted to grapple with and assess the proposition that Coase had laid out in 1960. These modeling decisions included both the theoretical frameworks laid onto the theorem and the assumptions (including meanings ascribed thereto) said to underlie it. The present article illustrates this using the 1960s and 1970s extortion debate as a backdrop, showing how conclusions reached regarding the theorem's validity hinged on the Coase theorem worlds created by the authors involved.

Type
Research Article
Copyright
Copyright © Millennium Economics Ltd 2014 

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

Allen, D. W. (1991), ‘What Are Transaction Costs?’, Research in Law and Economics, 14: 118.Google Scholar
Bertrand, E. (2010), ‘The Three Roles of the ‘Coase Theorem’ in Coase's Works’, European Journal of the History of Economic Thought, 17 (4): 9751000.Google Scholar
Bromley, D. W. (1978), ‘Externalities, Extortion, and Efficiency: Comment’, American Economic Review, 68 (4): 730735.Google Scholar
Buchanan, J. M. and Stubblebine, W. C. (1962), ‘Externality’, Economica, 29 (116): 371384.Google Scholar
Calabresi, G. (1968), ‘Transaction Costs, Resource Allocation and Liability Rules—A Comment’, Journal of Law and Economics, 11 (1): 6773.Google Scholar
Cheung, S. N. S. (1986) Will China Go Capitalist?, London: Institute of Economic Affairs.Google Scholar
Coase, R. H. (1959), ‘The Federal Communications Commission’, Journal of Law and Economics, 2 (1): 140.Google Scholar
Coase, R. H. (1960), ‘The Problem of Social Cost’, Journal of Law and Economics, 3 (October): 144.Google Scholar
Coase, R. H. (1964), ‘Discussion’, American Economic Review, 54 (3): 194197.Google Scholar
Coase, R. H. (1970), ‘Social Cost and Public Policy’, in Edwards, G. A. (ed.), Exploring the Frontiers of Administration: Six Essays for Managers, Toronto: York University Faculty of Administrative Studies, Bureau of Research, pp. 3344.Google Scholar
Coase, R. H. (1988a), ‘Blackmail’, Virginia. Law Review, 74 (4): 655676.Google Scholar
Coase, R. H. (1988b), The Firm, the Market, and the Law, Chicago: University of Chicago Press.Google Scholar
Coase, R. H. (1994), Essays on Economics and Economists, Chicago: University of Chicago Press.CrossRefGoogle Scholar
Cole, C. L. (1973), Microeconomics: A Contemporary Approach, New York: Harcourt Brace Jovanovich.Google Scholar
Cooter, R. (1982), ‘The Cost of Coase’, Journal of Legal Studies, 11 (1): 133.Google Scholar
Daly, G. 1974. ‘The Coase Theorem: Assumptions, Applications and Ambiguities’, Economic Inquiry, 12 (2): 203213.Google Scholar
Daly, G. and Giertz, J. F. (1975), ‘Externalities, Extortion, and Efficiency’, American Economic Review, 65 (5): 9971001.Google Scholar
Daly, G. and Giertz, J. F. (1978), ‘Externalities, Extortion, and Efficiency: Reply’, American Economic Review, 68 (4): 736738.Google Scholar
d’Arge, R. C. (1973), ‘Coase Theorem Symposium: Introduction’, Natural Resources Journal, 13 (October): 557560.Google Scholar
Davis, O. A. and Whinston, A. B. (1965), ‘Some Notes on Equating Private and Social Cost’, Southern Economic Journal, 32 (2): 113126.Google Scholar
de V. Graaff, J. (1957), Theoretical Welfare Economics, Cambridge: Cambridge University Press.Google Scholar
Demsetz, H. (1964), ‘The Exchange and Enforcement of Property Rights’, Journal of Law and Economics, 7 (October): 1126.Google Scholar
Demsetz, H. (1966), ‘Some Aspects of Property Rights’, Journal of Law and Economics, 9 (October): 6170.Google Scholar
Demsetz, H. (1971), ‘Theoretical Efficiency in Pollution Control: Comment on Comments’, Economic Inquiry, 9 (4): 444446.Google Scholar
Demsetz, H. (1972), ‘When Does the Rule of Liability Matter?’, Journal of Legal Studies, 1 (1): 1328.Google Scholar
Demsetz, H. (1978), ‘On Extortion: A Reply’, American Economic Review, 68 (3): 417418.Google Scholar
Fama, E. F. (1978), ‘The Effects of a Firm's Investment and Financing Decisions on the Welfare of Its Security Holders,’ American Economic Review, 68 (3), 272284.Google Scholar
Gifford, A. Jr. and Stone, C. C. (1973), ‘Externalities, Liability and the Coase Theorem: A Mathematical Analysis’, Economic Inquiry, 11 (3): 260269.Google Scholar
Goodin, R. E. (1976), ‘Possessive Individualism Again’, Political Studies, 24 (4): 488501.Google Scholar
Jaeger, K. (1975), ‘Steuern, Entschädigungen Und Das Coase Theorem’, Jahrbuch Für Sozialwissenschaft, 26 (3): 211227.Google Scholar
Jaffe, J. F. (1975), ‘The ‘Coase Theorem’: A Reexamination—Comment’, Quarterly Journal of Economics, 89 (4): 660661.Google Scholar
Jung, C., Krutilla, K., Viscusi, W. K., and Boyd, R. (1995), ‘The Coase Theorem in a Rent-Seeking Society’, International Review of Law and Economics, 15 (3): 259268.Google Scholar
Kitch, E. W. (1983), ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970’, Journal of Law and Economics, 26 (1): 163234.Google Scholar
Kneese, A. V. (1964), The Economics of Regional Water Quality Management, Baltimore, MD: The Johns Hopkins Press.Google Scholar
Kneese, A. V. and Bower, B. T. (1968), Managing Water Quality: Economics, Technology, Institutions, Baltimore, MD: The Johns Hopkins Press and Resources for the Future.Google Scholar
Marchand, J. R. and Russell, K. P. (1973), ‘Externalities, Liability, Separability, and Resource Allocation’, American Economic Review, 63 (4): 611620.Google Scholar
Medema, S. G. (1994), Ronald H. Coase, London: Macmillan.Google Scholar
Medema, S. G. (1996), ‘Of Pangloss, Pigovians, and Pragmatism: Ronald Coase on Social Cost Analysis’, Journal of the History of Economic Thought, 18 (1): 96114.Google Scholar
Medema, S. G. (1997). ‘Comment: The Coase Theorem, Rent Seeking, and the Forgotten Footnote’, International Review of Law and Economics, 17 (June): 177178.Google Scholar
Medema, S. G. (2011), ‘The Coase Theorem: Lessons for the Study of the History of Economic Thought’, Journal of the History of Economic Thought, 33 (March): 118.Google Scholar
Medema, S. G. (2013), ‘Debating Law's Irrelevance: Legal Scholarship and the Coase Theorem in the 1960s’, Working Paper, University of Colorado Denver.Google Scholar
Medema, S. G. (2014a), ‘1966 and All That: The Birth of the Coase Theorem Controversy’, Journal of the History of Economic Thought, 36(September): forthcoming.Google Scholar
Medema, S. G. (2014b), ‘The Coase Theorem Down Under: Revisiting the Economic Record Controversy’, History of Economics Review: forthcoming.Google Scholar
Medema, S. G. (2014c), ‘The Curious Treatment of the Coase Theorem in Environmental Economics, 1960–1979’, Review of Environmental Economics and Policy, 8 (Winter): 3957.Google Scholar
Medema, S. G. (2014d), ‘Neither Misunderstood nor Ignored: The Early Reception of Coase's Wider Challenge to the Analysis of Externalities,’ History of Economic Ideas, 24: forthcoming.Google Scholar
Medema, S. G. and Zerbe, R. O. Jr. (2000), ‘The Coase Theorem’, in Bouckaert, B. and De Geest, G. (eds.), The Encyclopedia of Law and Economics, Aldershot: Edward Elgar, pp. 836892.Google Scholar
Miller, R. LeRoy (1978), Intermediate Microeconomics: Theory, Issues, and Applications, New York: McGraw-Hill.Google Scholar
Morgan, M. S. (2012), The World in the Model, Cambridge: Cambridge University Press.Google Scholar
Mumey, G. A. (1967), ‘Earnings Probabilities and Capital Costs’, Journal of Business, 40 (4): 450461.Google Scholar
Mumey, G. A. (1970), ‘Trade Tax Asymmetry’, Canadian Journal of Economics, 3 (1): 7996.Google Scholar
Mumey, G. A. (1971), ‘The ‘Coase Theorem’: A Reexamination’, Quarterly Journal of Economics, 85 (4): 718723.Google Scholar
Ng, Y.-K. 1971. ‘Recent Developments in the Theory of Externality and the Pigovian Solution’, Economic Record, 47 (2): 169185.Google Scholar
Rothenberg, J. (1970), ‘The Economics of Congestion and Pollution: An Integrated View’, American Economic Review, 60 (May): 114121.Google Scholar
Samuelson, P. A. (1963), ‘Modern Economic Realities and Individualism’, Texas Quarterly, 6 (Summer): 128139.Google Scholar
Shoup, D. C. (1971), ‘Theoretical Efficiency in Pollution Control: Comment’, Economic Inquiry, 9 (3): 310313.Google Scholar
Shoup, D. C. (1972), ‘Theoretical Efficiency in Pollution Control: Further Comment’, Economic Inquiry, 10 (2): 220221.Google Scholar
Stigler, G. J. (1966), The Theory of Price, 3rd edn, New York: Macmillan.Google Scholar
Stigler, G. J. (1988), Memoirs of An Unregulated Economist, New York: Basic Books.Google Scholar
Swan, P. L. (1975), ‘The Coase Theorem and ‘Sequential’ Pareto Optimality’, Economic Record, 51 (2): 268271.Google Scholar
Tybout, R. A. (1972), ‘Pricing Pollution and Other Negative Externalities’, Bell Journal of Economics and Management Science, 3 (1): 252266.Google Scholar
Usher, D. (1998), ‘The Coase Theorem Is Tautological, Incoherent or Wrong’, Economics Letters, 61 (1): 311.Google Scholar
Veljanovski, C. G. (1977), ‘The Coase Theorem—The Say's Law of Welfare Economics?’, Economic Record, 53 (December): 535541.Google Scholar
Wellisz, S. (1964), ‘On External Diseconomies and the Government-Assisted Invisible Hand’, Economica, 31 (124): 345362.Google Scholar
Zelder, M. (1998), ‘The Cost of Accosting Coase: A Reconciliatory Survey of Proofs and Disproofs of the Coase Theorem’, in Medema, S. G. (ed.), Coasean Economics Law and Economics and the New Institutional Economics, Boston: Kluwer, pp. 6594.Google Scholar
Zerbe, R. O. Jr. (1970), ‘Theoretical Efficiency in Pollution Control’, Economic Inquiry, 8 (4): 364376.Google Scholar
Zerbe, R. O. Jr. (1971), ‘Theoretical Efficiency in Pollution Control: Reply,’ Economic Inquiry, 9 (3): 314317.Google Scholar