Coase Theorem

Discipline: Economics

Named after the English-born American economist Ronald Harry Coase (1910 - ).

Coase theorem asserts that as long as there are well-defined property rights (and no transaction costs), externalities will not cause a breakdown in the allocation of resources.

Externalities being defined as the benefits or costs to a society of the process of consumption or production; for example, pollution, disease and spill-overs.

R Coase, 'The Problem of Social Cost', Journal of Law and Economics 3, 1 (1960), 1-44


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