Can't See the Tacking for the Trees? Try a Coasian Solution
This note provides a modern story for principles instructors to use as a supplement to textbook accounts of problems associated with externalities and the applicability of the Coase theorem. Our story begins in July of 1988, when Larry Ellison paid $3.9 million for a home in the Pacific Heights neighborhood of San Francisco – a property that provided Ellison with a prized view of San Francisco Bay below. However, later, in 2004, a $6.9 million home below Ellison’s was purchased by Bernard and Jane von Bothmer. After taking ownership of the property below Ellison, the von Bothmers allowed three redwood trees and an acacia to grow by several feet. The redwood and acacia growth came at the expense of Ellison’s view: due to the taller trees, Ellison could no longer see San Francisco Bay from the third-story living room of his four-story home on the Bay. The story of Larry Ellison’s battle for a clear view of San Francisco Bay is a classic example of a property dispute that has the potential for settlement so long as rights are established. All of the key features for a Coasian bargain to work itself out are present: the ownership rights are clearly defined, transaction costs and communication costs are fairly low, and there are well established markets in tree services and land. The final outcome involved where resources—particularly Ellison’s uninhibited view of San Francisco Bay—flowed to the one valuing it most. This story gives scholars an opportunity to talk about the “Invariance Hypothesis” and the role that endowments and wealth play when Coasian bargains are made.
|Date of creation:||08 Jan 2013|
|Publication status:||Published in New Developments in Economic Education (2014): pp. 126-132|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert L. Sexton, 2006. "Using Short Movie and Television Clips in the Economics Principles Class," The Journal of Economic Education, Taylor & Francis Journals, vol. 37(4), pages 406-417, October.
- Barrett, Alan & Kearney, Ide & Goggin, Jean & Conefrey, Thomas, 2010. "Quarterly Economic Commentary, Summer 2010," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20102, April.
- David Colander, 2010. "The Evolution of U.S.Economics Textbooks," Middlebury College Working Paper Series 1037, Middlebury College, Department of Economics.
- Richard Holt & J. Barkley Rosser & David Colander, 2011.
"The Complexity Era in Economics,"
Review of Political Economy,
Taylor & Francis Journals, vol. 23(3), pages 357-369.
- David Colander & Richard P.F. Holt & J. Barkley Rosser, 2010. "The Complexity Era in Economics," Middlebury College Working Paper Series 1001, Middlebury College, Department of Economics.
- Barrett, Alan & Kearney, Ide & Conefrey, Thomas & O'Sullivan, Cormac, 2010. "Quarterly Economic Commentary, Autumn 2010," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20103, April.
- "Okada, Akira", 2010. "Toshiji Kawagoe, Experimental Economics," Economic Review, Hitotsubashi University, vol. 61(1), pages 85-87, January.
- Barrett, Alan & Kearney, Ide & Conefrey, Thomas & O'Sullivan, Cormac, 2010. "Quarterly Economic Commentary, Winter 2010," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20104, April.
- anonymous, 2010. "The economic importance of being educated," Forefront, Federal Reserve Bank of Cleveland, issue Fall, pages 6-9.
- R. Andrew Luccasen & M. Kathleen Thomas, 2010. "Simpsonomics: Teaching Economics Using Episodes of The Simpsons," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(2), pages 136-149, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:56783. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.