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The Coase Theorem Put to the Test in China

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  • Schwartz Pedro

    (Camilo José Cela University, Madrid, Spain)

Abstract

The Coase doctrine is generally presented as a static theorem that seeks to model the spontaneous correction of market failures through agreements made by the affected parties. However, according to the theorem as generally formulated, especially by Stigler, these results are only achieved under the questionable assumptions that transaction costs are null, property rights are well-defined, and the distribution of the benefit of the agreements does not affect the outcome. The lack of relevance of those assumptions has unfortunately resulted in the fruitless application of the statist theory of market failures as promulgated by Pigou. However, the spectacular progress of the Chinese economy after Mao, as analyzed by Ronald Coase and Ning Wang (2012), seems to have taken place without conforming at all to the propositions of that theorem. A Coase doctrine will be defined that better explains that extraordinary transformation.

Suggested Citation

  • Schwartz Pedro, 2023. "The Coase Theorem Put to the Test in China," Man and the Economy, De Gruyter, vol. 10(2), pages 63-74.
    • Handle: RePEc:bpj:maneco:v:10:y:2023:i:2:p:63-74:n:1002
    DOI: 10.1515/me-2024-2006
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    More about this item

    Keywords

    coase theorem; property rights; transaction costs; distributional effects; Chinese economic experience; pigouvian taxes;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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