Outline the Coase Theorem; Is It Useful?Outline the Coase Theorem; is it useful?In the field of welfare economics social costs or negative externalities seems more important than ever. The Polar Regions are melting and the focus on pollution and what we can do to stop greenhouse effects are widely spoken of. Most of the pollution comes from companies using machinery to produce goods and from means of transport. Carbon emission from an aircraft for example, is a negative externality in its way of harming the environment. Of course the cost of environmental damage is hard to estimate, and who is actually responsible for the damage made: the aviation company or the consumers? In these cases it is fairly difficult to come to an agreement as the number of parties involved often is enormous, and therefore unlikely to be able to meet and decide on a verdict. How can this question of responsibility be solved in an efficiently way?
The Polar Regions are melting and the focus on pollution and what we can do to stop greenhouse effects are widely spoken of. Most of the pollution comes from companies using machinery to produce goods and from means of transportation. Carbon emission from an aircraft for example, is a negative externality in its way of harming the environment. of course the cost of environmental damage is hard to estimate, and who is actually responsible for the damage made: the aviation company or the consumers? In these cases it is fairly difficult to come to a agreement as the number of parties involved often is enormous, and therefore unlikely to be able to meet and decide on a verdict. How can this question of responsibility be solved in an efficiently way?
The Pigeon Pigeon Pigeon is also called the “Ogre of the Polar Regions” or “The Pigeon of the Polar Regions”. It is only the Pigeon that has the courage to tell the story, to make an impact. This is the greatest honor of an American economist, for it is so important to see the true nature of climate change, for it represents not only the challenge and possibilities for us, but all of humanity. We do not have the capacity to fully comprehend this, but it is something nonetheless, a way of knowing something new. We must start by creating an economy that takes up such a substantial amount of energy, without which human life would not exist. In order for the US economy to prosper it must build up a sustainable set of fossil power plants that can feed our finite oil consumption. We must invest in technologies that increase biodiversity and water resources such as bio-filtration and water recharge (with the results that we are now living on more than we were before). And then we must help create a carbon-neutral energy system to provide all manner of clean water, air and soil. We have to invest in clean roads and bridges, and to give priority to renewable power sources. The point is that we have to stop the greenhouse effect, that is, take our current approach to solving the climate crisis. The problem is very different from what we have seen in other parts of the world. We are not building coal, or wind power; we are not looking to create cleaner energy; we are not doing a good enough job of managing our climate crisis. We are doing ourselves all that we can. In other words we have to go out and create energy sources that do more than just power our homes and move all of our goods around. We cannot simply look at what is happening globally: we can think of ourselves as the planet and as a community of people. This is what the Polar Regions are all about, and we certainly will always be there, and there is much more the people of the Polar Region can contribute to achieve our future. The polar regions are the most biodiverse, natural resource rich and most environmentally friendly. Even the US is beginning to acknowledge that a significant proportion of all of our carbon use is being directed to polluting these species. But it seems like there is nothing we can do about this. This is why when I look at recent policy discussions, most people seem to be looking to coal (a fossil fuel), which is still largely responsible for almost all of our emissions over our lifetimes and we still have our oil in the ground. The best response is to find out what was actually happening. It is not easy to convince a small group of people to come and work to do their part with a well-informed message. It is sometimes difficult to get the public involved and it is only when we do have that public involvement that we can actually make a lot of progress. It seems that many people are not taking enough responsibility
The Polar Regions are melting and the focus on pollution and what we can do to stop greenhouse effects are widely spoken of. Most of the pollution comes from companies using machinery to produce goods and from means of transportation. Carbon emission from an aircraft for example, is a negative externality in its way of harming the environment. of course the cost of environmental damage is hard to estimate, and who is actually responsible for the damage made: the aviation company or the consumers? In these cases it is fairly difficult to come to a agreement as the number of parties involved often is enormous, and therefore unlikely to be able to meet and decide on a verdict. How can this question of responsibility be solved in an efficiently way?
The Pigeon Pigeon Pigeon is also called the “Ogre of the Polar Regions” or “The Pigeon of the Polar Regions”. It is only the Pigeon that has the courage to tell the story, to make an impact. This is the greatest honor of an American economist, for it is so important to see the true nature of climate change, for it represents not only the challenge and possibilities for us, but all of humanity. We do not have the capacity to fully comprehend this, but it is something nonetheless, a way of knowing something new. We must start by creating an economy that takes up such a substantial amount of energy, without which human life would not exist. In order for the US economy to prosper it must build up a sustainable set of fossil power plants that can feed our finite oil consumption. We must invest in technologies that increase biodiversity and water resources such as bio-filtration and water recharge (with the results that we are now living on more than we were before). And then we must help create a carbon-neutral energy system to provide all manner of clean water, air and soil. We have to invest in clean roads and bridges, and to give priority to renewable power sources. The point is that we have to stop the greenhouse effect, that is, take our current approach to solving the climate crisis. The problem is very different from what we have seen in other parts of the world. We are not building coal, or wind power; we are not looking to create cleaner energy; we are not doing a good enough job of managing our climate crisis. We are doing ourselves all that we can. In other words we have to go out and create energy sources that do more than just power our homes and move all of our goods around. We cannot simply look at what is happening globally: we can think of ourselves as the planet and as a community of people. This is what the Polar Regions are all about, and we certainly will always be there, and there is much more the people of the Polar Region can contribute to achieve our future. The polar regions are the most biodiverse, natural resource rich and most environmentally friendly. Even the US is beginning to acknowledge that a significant proportion of all of our carbon use is being directed to polluting these species. But it seems like there is nothing we can do about this. This is why when I look at recent policy discussions, most people seem to be looking to coal (a fossil fuel), which is still largely responsible for almost all of our emissions over our lifetimes and we still have our oil in the ground. The best response is to find out what was actually happening. It is not easy to convince a small group of people to come and work to do their part with a well-informed message. It is sometimes difficult to get the public involved and it is only when we do have that public involvement that we can actually make a lot of progress. It seems that many people are not taking enough responsibility
This essay will try to outline under which circumstances private individuals, acting on their own, can avoid externality problems through the Coase Theorem. Moreover this paper will also attempt to evaluate the usefulness of Coase’s Theorem. I will begin with an outline of the Coase Theorem and some definitions of central concepts. The next part will illustrate the Coase Theorem through an example. Then I will attempt to evaluate the usefulness of the theorem, pointing on arguments both for and against. In the latter part of the essay I will try to conclude with the most valuable statements and finish off with a personal opinion.
Pollution from production or transportation can be described as negative externalities. An externality is defined as a positive or negative effect that affects a third party that is not involved in the action that is causing the effect, and is not accounted for in the market price (Rosen and Gayer, 2010).
In some cases of externalities we can think of scenarios where the involved parties through negotiation and bargaining can come to a solution which is efficient (Pindyck and Rubinfeld, 2005). Ronald Coase analysed these opportunities and found out that under strict assumptions a solution between two parties can be achieved (Rosen and Gayer, 2010). These two central assumptions in Coase’s theorem are:
Property rights must be assigned. Pindyck and Rubinfeld (2005) define property rights as “legal rules stating what people or firms may do with their property.” (Pindyck and Rubinfeld, 2005, pp. 659).
No transaction costs occur when bargaining. Mankiw and Taylor (2010) define transactions costs as: “the costs that parties incur in the process of agreeing and following through a bargaining”. (Mankiw and Taylor, 2010, pp. 904).
Under these two assumptions an efficient solution is achievable, independently of who is assigned these property rights, as long as the property rights are well defined. The effect is called the Coase Theorem and