Rethinking Market Failure: 'The Problem of Social Cost' Before the 'Coase Theorem'

68 Pages Posted: 13 Dec 2012 Last revised: 17 Nov 2017

See all articles by Steven G. Medema

Steven G. Medema

University of Colorado Denver - Department of Economics

Date Written: January 25, 2013

Abstract

This paper explores the reception of Ronald Coase's article, "The Problem of Social Cost," over the period 1961-1965. Though this article came to be most closely identified with the idea now known as the 'Coase theorem,' the focus of the early reactions to, and use made of, Coase's analysis was much more diverse, with significant emphasis placed on Coase's advocacy of a comparative institutional approach to social cost issues. Where Coase's negotiation result was taken up, as it was in several places, the analysis is largely affirming of Coase's result. What is common to all of these reactions was the view that Coase had posed a fundamental challenge to the received theory of externalities and of market failure generally.

Keywords: Coase theorem, externalities, market failure

JEL Classification: B2, D62, H00, K00, Q20

Suggested Citation

Medema, Steven G., Rethinking Market Failure: 'The Problem of Social Cost' Before the 'Coase Theorem' (January 25, 2013). Available at SSRN: https://ssrn.com/abstract=2188728 or http://dx.doi.org/10.2139/ssrn.2188728

Steven G. Medema (Contact Author)

University of Colorado Denver - Department of Economics ( email )

Box 173364
Denver, CO 80217-3364
United States

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