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Coase and the Departure from Property


  • Benito Arruñada


In "The Problem of Social Cost", Coase (1960) used a simplified conception of property rights as the outcome of mere contracting in independent exchanges. This conception has been suitable for successfully analyzing many important issues, including that of externalities related to the use of assets and public goods. However, its implicit assumption that exchange in property rights does not affect future transaction costs provides an inadequate basis for understanding property institutions and has caused confusion on the efficacy of private ordering and the role of the state and legal institutions. It has thus limited the scope of most of the economics of so-called property rights to analyses of political interactions and contract rights in personal exchanges. In the real world, property is defined by interaction between multiple exchanges which cause exchange-related non-contractible externalities among market participants. When such exchange-related externalities are considered, property becomes inherently linked to public and legal interventions, which are indispensable to reach true property—that is, in rem—enforcement and truly impersonal—asset-based—exchange.

Suggested Citation

  • Benito Arruñada, 2016. "Coase and the Departure from Property," Working Papers 895, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:895

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    References listed on IDEAS

    1. Arrunada, Benito, 2007. "Pitfalls to avoid when measuring institutions: Is Doing Business damaging business?," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 729-747, December.
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    More about this item


    Property rights; Externalities; enforcement; transaction costs; public ordering; private ordering; impersonal exchange;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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