The Coase Theorem

In 1960 a paper by Ronald Coase was published called The Problem of Social Cost, in which Coase deals head on with the problem of externalities by examining three broad categories of responses to such potential problems; taxation, regulation & property.

Lear Liberty knocked up a nice short video summing up the three solutions and using the concept of social costs (nowadays called transaction costs) to explain how best to control the production of externalities from the actions of economic agents.

Tyler Cowen and Alex Tabarrok of Marginal Revolution University have their own video on the same subject, considerably more detailed.

I heartily recommend both videos, preferably in the order above, to begin one's initiation into the mystery of the Coase Theorem!

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AynCrap

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