The Coase Theorem and the Preferential Option for the Poor

Abstract

This paper considers the relationship between the Coase Theorem as a normative tool of policy analysis and the Preferential Option for the Poor in Catholic Social Thought (CST). After explaining the conceptual foundations of the theorem for the benefit of those who work in CST but have little experience with economics, I argue that, although using the theorem normatively to design efficient legal rules does indeed have distributional consequences, nevertheless in a wide variety of cases these consequences are not incompatible with CST's Preferential Option for the Poor.

Keywords: Coase Theorem, Kaldor-Hicks Efficiency, Preferential Option for the Poor

JEL Classification: A12, A13, D31, D60, D61, D63, K00