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The Problem of Social Cost: What Problem? A Critique of the Reasoning of A.C. Pigou and R.H. Coase

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  • Demsetz Harold

    (University of California, Los Angeles)

Abstract

This essay discusses and refutes allegations by A.C. Pigou and R.H. Coase that a competitive, private-ownership economic system that conforms to the neoclassical model fails to allocate resources efficiently. The essay then suggests a source of inefficiency that differs from and is much more limited in application than are those offered by Pigou and Coase; and the suggested source, moreover, is compatible with the neoclassical model.

Suggested Citation

  • Demsetz Harold, 2011. "The Problem of Social Cost: What Problem? A Critique of the Reasoning of A.C. Pigou and R.H. Coase," Review of Law & Economics, De Gruyter, vol. 7(1), pages 1-13, February.
    • Handle: RePEc:bpj:rlecon:v:7:y:2011:i:1:n:1
    DOI: 10.2202/1555-5879.1502
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    References listed on IDEAS

    as
    1. Demsetz,Harold, 2012. "From Economic Man to Economic System," Cambridge Books, Cambridge University Press, number 9781107640856.
    2. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(4), pages 582-606.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Ronald Coase
      by ? in Tiempo Económico on 2013-09-05 15:12:00

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    Cited by:

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    2. Yun-chien Chang, 2015. "An economic and comparative analysis of specificatio (the accession doctrine)," European Journal of Law and Economics, Springer, vol. 39(2), pages 225-243, April.
    3. Anetta Čaplánová & Marcel Novák, 2015. "Transakčné náklady, vlastnícke práva a externality - k vedeckému odkazu R. H. Coasea [Transaction Costs, Property Rights and Externalities - on the Contribution of R. H. Coase to Economic]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(2), pages 244-257.
    4. Elodie Bertrand, 2019. "Much ado about nothing? The controversy over the validity of the Coase theorem," Post-Print hal-03479468, HAL.
    5. Jankovic Ivan & Block Walter, 2019. "Private Property Rights, Government Interventionism and Welfare Economics," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 365-397, December.
    6. Robert B. Ekelund Jr & Edward O. Price III, 2012. "The Economics of Edwin Chadwick," Books, Edward Elgar Publishing, number 14915.
    7. Colin Doran & Thomas Stratmann, 2021. "The effects of neighboring parties on the value of rights: Evidence from timber harvests," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 705-756, October.
    8. Button, Kenneth, 2020. "The Transition From Pigou’S Ideas On Road Pricing To Their Application," Journal of the History of Economic Thought, Cambridge University Press, vol. 42(3), pages 417-438, September.
    9. Henry Manne, 2014. "Resurrecting the ghostly entrepreneur," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(3), pages 249-258, September.
    10. Stephen Salant & Nathan Seegert, 2018. "Should Congestion Tolls be Set by the Government or by the Private Sector? The Knight–Pigou Debate Revisited," Economica, London School of Economics and Political Science, vol. 85(339), pages 428-448, July.
    11. Vahabi, Mehrdad, 2011. "Soft budget constraint and the parastatal sector," MPRA Paper 37926, University Library of Munich, Germany.
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