Table of Contents

The Elgar Companion to Ronald H. Coase

The Elgar Companion to Ronald H. Coase

Edited by Claude Ménard and Elodie Bertrand

Ronald H. Coase was one of the most innovative and provocative economists of the twentieth century. Besides his best known papers on ‘The Nature of the Firm’ and ‘The Problem of Social Cost’, he had a major role in the development of the field of law and economics, and made numerous influential contributions to topics including public utilities, regulation and the functioning of markets. In this comprehensive Companion, 31 leading economists, social scientists and legal scholars assess the impact of his work with particular reference to the research programs initiated, the influence on policymakers, and the challenge to conventional perspectives.

Chapter 8: Coasean bargaining to address environmental externalities

Gary D. Libecap

Subjects: economics and finance, history of economic thought, industrial organisation, institutional economics, law and economics, law - academic, law and economics


I examine Ronald Coase’s criticism of standard regulatory and tax policies to address environmental externalities. I elaborate some of Coase’s key points and discuss opportunities for Coasean exchange as an alternative mitigation approach. Regulation, tax, and Coasean exchange, such as through cap-and-trade regimes, are presented as substitutes, based on the relative transaction costs involved. Transaction costs are those of information, bounding, enforcing, and exchanging property rights. In general, transaction costs are not examined in depth in the environmental economics literature. This is particularly the case for the costs of political bargaining and lobbying that arise from implementing and administering government regulation and tax policies, although these costs have received somewhat more attention with cap and trade regimes. Coasean exchange and important market design issues are illustrated with examples.

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