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


  • Demsetz Harold

    (University of California, Los Angeles)


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

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

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    1. Ronald Coase
      by ? in Tiempo Económico on 2013-09-05 15:12:00


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    7. 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.
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    9. 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.
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