IDEAS home Printed from https://ideas.repec.org/a/mes/jeciss/v50y2016i3p872-895.html
   My bibliography  Save this article

Pareto Efficiency, the Coase Theorem, and Externalities: A Critical View

Author

Listed:
  • Andrea Ventura
  • Carlo Cafiero
  • Marcello Montibeller

Abstract

We offer a critical review of the Paretian definition of efficiency by noting its correspondence with the description of the logic underpinning market relationships. With reference to Ludwig Wittgenstein’s analysis of the value content of tautologies, we discuss the tautological nature of the propositions regarding the efficiency of exchange and market equilibria when there are externalities. We critically review the debate on the Coase theorem, its treatment of externalities, and the contrast with the Pigouvian approach, taking into account the distinction between propositions that are true based on their formal logical structure and propositions that are true with respect to their correspondence to actual states of affairs. We also reveal and discuss the logical inconsistencies — in particular, the one between the Coase theorem and perfect competition — and the practical consequences of the application of Pareto efficiency to the analysis of externalities.

Suggested Citation

  • Andrea Ventura & Carlo Cafiero & Marcello Montibeller, 2016. "Pareto Efficiency, the Coase Theorem, and Externalities: A Critical View," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(3), pages 872-895, July.
    • Handle: RePEc:mes:jeciss:v:50:y:2016:i:3:p:872-895
    DOI: 10.1080/00213624.2016.1213595
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00213624.2016.1213595
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00213624.2016.1213595?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.

    More about this item

    Statistics

    Access and download statistics

    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:mes:jeciss:v:50:y:2016:i:3:p:872-895. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MJEI20 .

    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.