Free-riding is at the core of environmental problems. If a climate coalition reduces its emissions, world prices change and nonparticipants typically emit more; they may also extract the dirtiest type of fossil fuel and invest too little in green technology. The coalition’s second-best policy distorts trade and is not time consistent. However, suppose that the countries can trade the rights to exploit fossil-fuel deposits: As soon as the market clears, the above-mentioned problems vanish and the first-best is implemented. In short, the coalition’s best policy is to simply buy foreign deposits and conserve them.

/pdf/buy-coal-a-case-for-supply-side-environmental-policy-4knfxmh5qj.pdf

Buy Coal! A Case for Supply-Side Environmental Policy

Is there a way to understand why some global environmental externalities are addressed effectively, whereas others are not? The transaction costs of defining the property rights to mitigation benefits and costs is a useful framework for such analysis. This approach views international cooperation as a contractual process among country leaders to assign those property rights. Leaders cooperate when it serves domestic interests to do so. The demand for property rights comes from those who value and stand to gain from multilateral action. Property rights are supplied by international agreements that specify resource access and use, assign costs and benefits including outlining the size and duration of compensating transfer payments, and determining who will pay and who will receive them. Four factors raise the transaction costs of assigning property rights: (i) scientific uncertainty regarding mitigation benefits and costs; (ii) varying preferences and perceptions across heterogeneous populations; (iii) asymmetric information; and (iv) the extent of compliance and new entry. These factors are used to examine the role of transaction costs in the establishment and allocation of property rights to provide globally valued national parks, implement the Convention on the International Trade in Endangered Species of Wild Fauna and Flora, execute the Montreal Protocol to manage emissions that damage the stratospheric ozone layer, set limits on harvest of highly-migratory ocean fish stocks, and control greenhouse gas emissions. ( JEL D23, P14, Q22, Q51, Q54, Q58)

/pdf/addressing-global-environmental-externalities-transaction-4i9knyzpmp.pdf

Addressing Global Environmental Externalities: Transaction Costs Considerations

In the social sciences, there are two things one can do with a theory and the aspect of reality it is meant to explain: one can use the theory to improve reality2, or one can use reality to improve the theory. The purpose of the present thesis is very much to do the latter. The empirical problem concerns the proper scope of government3, which we will use to examine the new
institutional economics (hereafter: NIE) as it was developed starting with the work of Ronald Coase.4 For reasons that will be explained below, we will focus particularly on the history of the railway industry in Western Europe.

https://ris.utwente.nl/ws/files/6066706/thesis_M_Holterman.pdf

The transaction costs of semi-public institutions : railway history as a challenge for coase

This paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach. It has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that Coaseian bargaining can be extended to any institutional scenario, i.e., voluntary as well as coercive exchange. However, voluntary transactions cannot capture the logic of coercive power. This means that the assumption of an efficient political market is not valid, and that the “political Coase theorem” lacks the logical consistency to provide a cornerstone for political theory.

/pdf/appropriation-violent-enforcement-and-transaction-costs-a-171v59rpeo.pdf

Appropriation, violent enforcement, and transaction costs: a critical survey

There exists a long line of challengers to the ‘Coase Theorem’. All of these rest on fundamental misconceptions of property rights, transaction costs, and their interaction. Here I examine two attacks that have gone unchallenged: one by Halpin, the other by Usher. I argue that both, in failing to either use or understand an adequate definition of transaction costs, fail to deliver a fatal blow to Coase's famous idea.

/pdf/the-coase-theorem-coherent-logical-and-not-disproved-iyrkwc6san.pdf

Ejan Mackaay

Papers

The Coase Theorem