IDEAS home Printed from https://ideas.repec.org/a/spr/eaiere/v18y2021i1d10.1007_s40844-020-00164-3.html
   My bibliography  Save this article

The institutionalisation of zero transaction cost theory: a case study in Danish district heating regulation

Author

Listed:
  • Søren Djørup

    (Aalborg University)

Abstract

A principle of socioeconomic viability is implemented in the legislative basis of the contemporary Danish decarbonisation energy policy. Consequently, economic theory and method are institutionalised in the energy sector as a de facto regulation of investment decisions. A disputed element of this regulation is the so-called tax distortion loss principle which is rooted in neoclassical zero transaction cost theory. Motivated by its direct effect on investments, this article examines whether the applied economic method underpins the technological transition. By applying a Coasian critique, it is shown that its application has no solid foundation in the neoclassical economic theory as the assumption of zero transaction costs is not fulfilled. Meanwhile, the implication of its use involves economic inefficiencies and barriers to the technological transition. As such, the method is in conflict with the aim of the legislation that has spurred its institutionalisation. It is thus a case study of the limits to the institution free mainstream economics and how it may fall short in a real-world application.

Suggested Citation

  • Søren Djørup, 2021. "The institutionalisation of zero transaction cost theory: a case study in Danish district heating regulation," Evolutionary and Institutional Economics Review, Springer, vol. 18(1), pages 159-174, April.
    • Handle: RePEc:spr:eaiere:v:18:y:2021:i:1:d:10.1007_s40844-020-00164-3
    DOI: 10.1007/s40844-020-00164-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40844-020-00164-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40844-020-00164-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lund, Rasmus & Mathiesen, Brian Vad, 2015. "Large combined heat and power plants in sustainable energy systems," Applied Energy, Elsevier, vol. 142(C), pages 389-395.
    2. Ronald H. Coase, 2008. "The Institutional Structure of Production," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 2, pages 31-39, Springer.
    3. Chittum, Anna & Østergaard, Poul Alberg, 2014. "How Danish communal heat planning empowers municipalities and benefits individual consumers," Energy Policy, Elsevier, vol. 74(C), pages 465-474.
    4. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    5. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
    6. Lund, Henrik & Andersen, Anders N. & Østergaard, Poul Alberg & Mathiesen, Brian Vad & Connolly, David, 2012. "From electricity smart grids to smart energy systems – A market operation based approach and understanding," Energy, Elsevier, vol. 42(1), pages 96-102.
    7. Ronald H. Coase, 2000. "The new institutional economics," Chapters, in: Claude Ménard (ed.), Institutions, Contracts and Organizations, chapter 1, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Østergaard, P.A. & Lund, H. & Thellufsen, J.Z. & Sorknæs, P. & Mathiesen, B.V., 2022. "Review and validation of EnergyPLAN," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    2. Wang, Sen & Bogle, Tim & van Kooten, G. Cornelis, 2012. "Forestry and the New Institutional Economics," Working Papers 130818, University of Victoria, Resource Economics and Policy.
    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. Martin Ricketts, 2014. "The Contribution and Intellectual Legacy of Ronald Coase (1910–2013)," Economic Affairs, Wiley Blackwell, vol. 34(1), pages 46-58, February.
    5. Elodie Bertrand, 2014. "‘The fugitive’: The figure of the judge in Coase's economics," Post-Print hal-03481745, HAL.
    6. Steven G. Medema, 2020. "The Coase Theorem at Sixty," Journal of Economic Literature, American Economic Association, vol. 58(4), pages 1045-1128, December.
    7. Glenn Furton & Adam Martin, 2019. "Beyond market failure and government failure," Public Choice, Springer, vol. 178(1), pages 197-216, January.
    8. Herbert Hovenkamp, 2011. "Coasean markets," European Journal of Law and Economics, Springer, vol. 31(1), pages 63-90, February.
    9. Alain Marciano & Sophie Harnay, 2008. "Posner, Economics and the Law: from Law and Economics to an Economic Analysis of Law," ICER Working Papers 09-2008, ICER - International Centre for Economic Research.
    10. Zhihong Mo, 2012. "Decentralized planning in a market economy? On the nature of Coase’s research program," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 115-129, June.
    11. Fernando Toboso, 2006. "Old organizational issues from a new institutional economics perspective. Some introductory remarks," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 21(2), pages 3-11, December.
    12. Jonathan M. Lee, 2015. "The Impact of Heterogeneous NOx Regulations on Distributed Electricity Generation in U.S. Manufacturing," Working Papers 15-12, Center for Economic Studies, U.S. Census Bureau.
    13. Lund, Henrik & Thellufsen, Jakob Zinck & Sorknæs, Peter & Mathiesen, Brian Vad & Chang, Miguel & Madsen, Poul Thøis & Kany, Mikkel Strunge & Skov, Iva Ridjan, 2022. "Smart energy Denmark. A consistent and detailed strategy for a fully decarbonized society," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    14. Østergaard, Poul Alberg & Werner, Sven & Dyrelund, Anders & Lund, Henrik & Arabkoohsar, Ahmad & Sorknæs, Peter & Gudmundsson, Oddgeir & Thorsen, Jan Eric & Mathiesen, Brian Vad, 2022. "The four generations of district cooling - A categorization of the development in district cooling from origin to future prospect," Energy, Elsevier, vol. 253(C).
    15. Wiser, R. H., 2000. "The role of public policy in emerging green power markets: an analysis of marketer preferences," Renewable and Sustainable Energy Reviews, Elsevier, vol. 4(2), pages 177-212, June.
    16. repec:ebl:ecbull:v:3:y:2007:i:68:p:1-7 is not listed on IDEAS
    17. Amar Gande & Kose John & Vinay B. Nair & Lemma W. Senbet, 2020. "Taxes, institutions, and innovation: Theory and international evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1413-1442, December.
    18. Alex Robson & Stergios Skaperdas, 2008. "Costly enforcement of property rights and the Coase theorem," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(1), pages 109-128, July.
    19. Yochanan Shachmurove, 2012. "Failing Institutions Are at the Core of the U.S. Financial Crisis," PIER Working Paper Archive 12-040, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    20. Evgeny A. Kuzmin & Sergei M. Semyonovykh, 2015. "Rethinking of Coase Theorem: Externalities and Uncertainty," International Journal of Economics and Financial Issues, Econjournals, vol. 5(4), pages 875-883.
    21. Dieter Schmidtchen & Jenny Helstroffer & Christian Koboldt, 2021. "Regulatory failure and the polluter pays principle: why regulatory impact assessment dominates the polluter pays principle," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 109-144, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eaiere:v:18:y:2021:i:1:d:10.1007_s40844-020-00164-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.