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Coase v. the Coasians

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  • Simon Johnson
  • Andrei Shleifer

Abstract

The Coase theorem implies that, in a world of positive transaction costs, any of a number of strategies, including judicially enforced private contracts, judicially enforced laws, or even government regulation, may be the cheapest way to bring about efficient resource allocation. Unfortunately, some Coasians have ignored the possibility that the last of these strategies may sometimes be the best. This paper compares the regulation of financial markets in Poland and the Czech Republic in the 1990s, when the judicial systems remained underdeveloped in both countries. In Poland, strict enforcement of the securities law by an independent Securities and Exchange Commission was associated with rapid development of the stock market. In the Czech Republic, hands-off regulation was associated with a near collapse of the stock market. These episodes illustrate the centrality of law enforcement in making markets work, and the possible role of regulators in law enforcement.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7447.

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Date of creation: Dec 1999
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Publication status: published as Edward Glaeser & Simon Johnson & Andrei Shleifer, 2001. "Coase Versus The Coasians," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 853-899, August.
Handle: RePEc:nbr:nberwo:7447

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  1. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
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  8. Eric Friedman & Simon Johnson & Peter Boone & Alasdair Breach, 1999. "Corporate Governance in the Asian Financial Crisis," Departmental Working Papers 199920, Rutgers University, Department of Economics.
  9. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  10. Stijn Claessens & Simeon Djankov, 1999. "Ownership Concentration and Corporate Performance in the Czech Republic," William Davidson Institute Working Papers Series 227, William Davidson Institute at the University of Michigan.
  11. Kaplow, Louis & Shavell, Steven, 2002. "Economic analysis of law," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 25, pages 1661-1784 Elsevier.
  12. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
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  14. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
  15. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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Cited by:
  1. Dyck, Alexander & Zingales, Luigi, 2002. "Private Benefits of Control: An International Comparison," CEPR Discussion Papers 3177, C.E.P.R. Discussion Papers.
  2. Simplice A, Asongu, 2012. "Government quality determinants of stock market performance in African countries," MPRA Paper 39631, University Library of Munich, Germany.
  3. Hooper, Vince & Sim, Ah Boon & Uppal, Asfandyar, 2009. "Governance and stock market performance," Economic Systems, Elsevier, vol. 33(2), pages 93-116, June.
  4. Irena Grosfeld & Iraj Hashi, 2001. "The Evolution of Ownership Structure in Firms Privatized through Wholesale Schemes in the Czech Republic and Poland," CASE Network Reports 0049, CASE-Center for Social and Economic Research.
  5. Matías Braun & Claudio Raddatz, 2004. "Trade liberalization and the politics of financial development," Working Papers 04-3, Federal Reserve Bank of Boston.
  6. Simplice A, Asongu, 2012. "Democracy and Stock Market Performance in African Countries," MPRA Paper 38168, University Library of Munich, Germany.
  7. Barbara Blaszczyk & Richard Woodward, 2001. "Secondary Privatisation: The Evolution of Ownership Structures of Privatised Enterprises," CASE Network Reports 0050, CASE-Center for Social and Economic Research.
  8. Bruce Kogut & Andrew Spicer, 2000. "Institutional Technology and the Chains of Trust: Capital Markets and Privatization in Russia and the Czech Republic," William Davidson Institute Working Papers Series 335, William Davidson Institute at the University of Michigan.
  9. Simplice A, Asongu, 2011. "Government quality determinants of stock market performance in developing countries," MPRA Paper 35508, University Library of Munich, Germany.

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