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Making Coasean Property More Coasean

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  • Thomas W. Merrill
  • Henry E. Smith

Abstract

In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase's purpose, but its limitations emerge when we apply Coase's central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional analysis. Because transaction costs are positive, property is initially defined in terms of things, uses are grouped under exclusion rights, and in rem rights are widely employed. A more thoroughly Coasean approach points back to a picture of property more like the traditional one furnished by the law.

Suggested Citation

  • Thomas W. Merrill & Henry E. Smith, 2011. "Making Coasean Property More Coasean," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 77-104.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/661946
    DOI: 10.1086/661946
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    References listed on IDEAS

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    2. Arruã‘Ada, Benito, 2017. "Property as sequential exchange: the forgotten limits of private contract," Journal of Institutional Economics, Cambridge University Press, vol. 13(4), pages 753-783, December.
    3. Arruã‘Ada, Benito, 2017. "How should we model property? Thinking with my critics," Journal of Institutional Economics, Cambridge University Press, vol. 13(4), pages 815-827, December.
    4. M. J. Histen, 2022. "The extent of the firm," Evolutionary and Institutional Economics Review, Springer, vol. 19(2), pages 545-567, September.
    5. Rossi, Enrico, 2020. "Reconsidering the dual nature of property rights: personal property and capital in the law and economics of property rights," LSE Research Online Documents on Economics 105840, London School of Economics and Political Science, LSE Library.
    6. Henry E. Smith, 2019. "Complexity and the Cathedral: making law and economics more Calabresian," European Journal of Law and Economics, Springer, vol. 48(1), pages 43-63, August.
    7. James Rycroft & John M. Luiz, 2018. "Homelessness, Property Rights, and Institutional Logics," Working Papers 750, Economic Research Southern Africa.
    8. Steven G. Medema, 2020. "The Coase Theorem at Sixty," Journal of Economic Literature, American Economic Association, vol. 58(4), pages 1045-1128, December.
    9. Raina, Ajay & Palaniswami, M., 2021. "The ownership challenge in the Internet of things world," Technology in Society, Elsevier, vol. 65(C).

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