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The Coase Theorem and Arthur Cecil Pigou

Herbert J. Hovenkamp

University of Iowa - College of Law

January 13, 2010

Arizona Law Review, Vol. 51, p. 633, 2009
U Iowa Legal Studies Research Paper No. 08-44

In "The Problem of Social Cost" Ronald Coase was highly critical of the work of Cambridge University Economics Professor Arthur Cecil Pigou, presenting him as a radical government interventionist. In later work Coase's critique of Pigou became even more strident. In fact, however, Pigou's Economics of Welfare created the basic model and many of the tools that Coase's later work employed. Much of what we today characterize as the "Coase Theorem," including the relevance of transaction costs, externalities, and bilateral monopoly, was either stated or anticipated in Pigou's work. Further, Coase's extreme faith in private bargaining led him to fail to see problems that Pigou saw quite clearly and that remain with us to this day.

Number of Pages in PDF File: 18

Keywords: Coase Theorem, Pigou, Social Cost, Law and Economics, Economic History, Legal History, Marginalism

JEL Classification: B1, B2, K2, L2, N, N2, N8

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Date posted: October 15, 2008 ; Last revised: January 29, 2010

Suggested Citation

Hovenkamp, Herbert J., The Coase Theorem and Arthur Cecil Pigou (January 13, 2010). Arizona Law Review, Vol. 51, p. 633, 2009; U Iowa Legal Studies Research Paper No. 08-44. Available at SSRN: http://ssrn.com/abstract=1275987

Contact Information

Herbert J. Hovenkamp (Contact Author)
University of Iowa - College of Law ( email )
407 Boyd Law Building
Iowa City, IA 52242
United States
319-335-9079 (Phone)
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