The Problem of Social Cost: The contribution of Ronald Coase, 1991 Nobel Prize in Economics'

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• The Problem of Social Cost The contribution of
  Ronald Coase, 1991 Nobel Prize in Economics.
• 1. Emphasis on the reciprocal nature of
  environmental problems (polluter/pollutee).
  Hence, he focuses not on the externality, but on
  the transaction or the transaction that does not
  take place. Why might this make sense for
  solving environmental and resource problems?
• 2. Coase was concerned with whether or not
  Pigouvian taxes should be used to equate private
  and social costs of production and thereby change
  behavior and eliminate the externality. Coase
  rejected automatic reliance on Pigouvian taxes.
  Why?
• 3. Why might it be non optimal (inefficient) to
  always subsidize the victim?
• 4. If we view environmental and resource problems
  as ones of contract that is a potential
  transaction (to reduce air pollution, over
  fishing, etc), how does that change how we view
  environmental and resource problems?

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• 4. What does it mean to say if transaction costs
  are zero? Would there be environmental and
  resource problems (of the commons)?
• 5. How might we look then to the gains from trade
  from solving resource and environmental problems
  and what factors become critical?
• -size of the problem,
• -information limitations and asymmetries,
• -the number of parties involved,
• -heterogeneities among the parties,
• -the nature of property rights,
• -enforcement of the contract,
• -the relative costs of having one party rather
  than another respond to the problem,
• -distribution of costs and benefits.

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• 6. In resource and environmental problems, why
  might residual claimant matter?
• 7. How would incentive-based instruments fit
  within Coases arguments?
• 8. If we do assign property rights to remove the
  externality, and if transaction costs are zero,
  does it matter who gets the rights in solving the
  environmental or resource problem? Why? What is
  affected? If transaction costs are positive,
  does the initial distribution matter? Why?
• 9. How are our conclusions changed if transaction
  costs are very highlets say for victims to get
  together to bargain with the polluting factory?