I don’t know if other academics experience this, but I find that, in scholarship, I am drawn to certain texts or problems over and over again for reasons that remain elusive. And so here I am again, writing yet another paper on Coase. A couple months ago, at a conference on “Fantasy and Markets,” at Cardozo Law School, where I presented the paper, one genial psychoanalyst suggested (during the panel no less) that I really needed to figure out what Coase was doing in my primal scene.
This brought peals of laughter (self included). And then we all moved on. All of us, except me apparently. I was left to contemplate my primal scene:
More seriously, I actually like “The Problem of Social Cost.” And the thing is I know very well that, given my politics, I am not supposed to like it. I also know very well that, in the article, Coase evinces a preference for markets (as opposed to government regulation). And I know too that the article has morphed reductively into what is now irretrievably identified as the “Coase Theorem” and that the latter has been used at various times to authorize all sorts of questionable prescriptions including:
1) Try to define legal entitlements or regimes so that transaction costs allow rearrangement among the parties.
2) Where possible, try to reduce transaction costs by redefining entitlements and legal regimes.
3) Forbear from enacting laws that would prohibit parties from rearranging their entitlements.
4) Where transaction costs are high enough to prevent rearrangement through private bargaining, try to establish a legal regime that would replicate what the parties would have agree to had there been no transaction costs.
5) Where transaction costs are high enough to prevent rearrangement through private bargaining, try to establish a legal regime that accords with Kaldor Hicks efficiency.
I know all this. And still I argue: None of these prescriptions is to be found in Coase’s article. And each is an interpretation reductively made by others—principally rational choice theorists associated with the Chicago School. And what’s more, the prescriptions do not follow (except in a disjunctive way) from Coase’s arguments. And worse even, they are contrary to Coase’s arguments. And the articulated preference for markets is no more than a “belief,” and Coase’s actual argument are much more tempered and skeptical. And they’re consistent with his earlier commitments to socialism. And….well, just see here.