Monday, September 9, 2013
Nuances About Economics
Ronald Coase was a famous economist who died recently. He came up with the Coase Theorem, which is the concept that initial allocation of an externality or good doesn't matter if there are no transaction costs (a big 'if'). In fact Coase himself acknowledges that in real economic situations, transaction costs are almost never low enough for the initial allocation not to matter. Nuances in economics are typically lost in politics. He's frequently cited by the right wing as being against governmental regulation and pro market solutions for environmental problems.
Severin Borenstein, a professor in the Haas Business School at UC Berkeley sets the record straight.