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Political Coase Theorem

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  • Parisi, Francesco

Abstract

This article considers the applicability of the Coase theorem (in both its positive and normative formulations) to the political market. The article analogizes the choice of decision rules in the political market to the choice of legal rules in the traditional Coase theorem and further analogizes alternative initial coalitions to the different initial allocations of entitlements considered by Coase (1960). On the basis of these analogies, the paper examines the relevance (or lack thereof) of alternative voting rules and initial coalitions on the final political outcome. The article further shows that, if all voters are allowed to enter into Coasian bargaining over the policy outcome to be adopted by the majority coalition (i.e., if political bargains are possible and are enforceable), uniqueness and stability are obtained. The analysis of the axiomatic Nash bargaining equilibrium yields an interesting geometric intuition. If voters have similar utility functions centered around different ideal policy points, the Coasian bargaining will be conducive to the "center of mass" of the policy space, which weighs the agents' preferences as revealed in the bargaining process. Such ideal equilibrium satisfies most criteria of social welfare. The article concludes considering the various practical limits of this ideal political market, whenever collective action and agency problems affect the political bargaining in a representative or direct democracy. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Parisi, Francesco, 2003. "Political Coase Theorem," Public Choice, Springer, vol. 115(1-2), pages 1-36, April.
  • Handle: RePEc:kap:pubcho:v:115:y:2003:i:1-2:p:1-36
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    Citations

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    Cited by:

    1. Claudio Balestri, 2016. "On the Inefficiency of Political Exchange," Public Organization Review, Springer, vol. 16(2), pages 167-178, June.
    2. Stéphane Gonzalez & Alain Marciano, 2017. "De nouveaux éclairages sur le théorème de Coase et la vacuité du cœur," Revue d'économie politique, Dalloz, vol. 127(4), pages 579-600.
    3. Barbara Luppi & Francesco Parisi, 2012. "Politics with(out) Coase," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(2), pages 175-187, July.
    4. Francesco Parisi, 2012. "Markets, votes, and The Calculus of Consent," Public Choice, Springer, vol. 152(3), pages 451-453, September.
    5. Voßwinkel, Jan, 2007. "Die (Un-)Ordnung des deutschen Föderalismus: Überlegungen zu einer konstitutionenökonomischen Analyse," Freiburg Discussion Papers on Constitutional Economics 07/1, Walter Eucken Institut e.V..
    6. Alex Robson, 2014. "Transaction costs can encourage Coasean bargaining," Public Choice, Springer, vol. 160(3), pages 539-549, September.
    7. Peter Boettke, 2017. "Robert Tollison and operationalizing public choice," Public Choice, Springer, vol. 171(1), pages 17-22, April.
    8. Michael C. Munger, 2019. "Tullock and the welfare costs of corruption: there is a “political Coase Theorem”," Public Choice, Springer, vol. 181(1), pages 83-100, October.
    9. Aurélien Portuese, 2012. "Law and economics of the European multilingualism," European Journal of Law and Economics, Springer, vol. 34(2), pages 279-325, October.
    10. Alexander Salter, 2015. "Sovereignty as exchange of political property rights," Public Choice, Springer, vol. 165(1), pages 79-96, October.
    11. Ian A. MacKenzie & Markus Ohndorf, 2014. "Coasean Bargaining in the Presence of Pigouvian Taxation: Revisiting the Buchanan-Stubblebine-Turvey Theorem," Discussion Papers Series 515, School of Economics, University of Queensland, Australia.
    12. Herbert Hovenkamp, 2011. "Coasean markets," European Journal of Law and Economics, Springer, vol. 31(1), pages 63-90, February.
    13. Salter, Alexander William, 2015. "Rights to the Realm: Reconsidering Western Political Development," American Political Science Review, Cambridge University Press, vol. 109(4), pages 725-734, November.
    14. Trent J. MacDonald, 2019. "The Political Economy of Non-Territorial Exit," Books, Edward Elgar Publishing, number 18871.
    15. Tsai, I-Tsung & Mezher, Toufic, 2020. "Rationalizing energy policy reforms in the gulf cooperation council: Implications from an institutional analysis," Energy Policy, Elsevier, vol. 142(C).
    16. MacKenzie, Ian A. & Ohndorf, Markus, 2016. "Coasean bargaining in the presence of Pigouvian taxation," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 1-11.

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