The Problem of Social Cost by R H Coase Analysis

Document Type:Research Paper

Subject Area:Law

Document 1

H. Coase is a clear indication of the divergence views existing between private individuals and institutions and social costs. The author precisely emphasized on what he referred to as “the reciprocal nature of the problem” (Coase 2) through which also a desirable solution is provided to deal with all unintended social costs. Coase in this article points out at the problem that individuals experience in regards to nuisance behavior of their neighbors. Therefore, this paper will offer a succinct analysis of the article with a specific focus on its primary ideas and the implications which it has on issue of the land use controls. To understand these implications, this paper will focus on Coase Theorem and the land use controls. Key ideas • Liability for damages. Individuals and firms should be the only persons who contribute to divergence should be held liable for any damages. The polluters must do two things; one, pay damages for the pollution or introduction of legal measures such as taxation on any activity that causes pollution. • Issue of costless market transaction (zero transaction costs). In cases where the enforceability and assignment of property rights have been achieved by parties, there is an assumed internalization of externalities. Therefore, the bargain is the most efficient way of resources allocation even better than litigation and any other prior allocation. • A should be introduced to ascertain the marginal benefits accruing from pollution against the marginal costs of the polluting activities. Analysis It is portrayed in the article that the author intended to introduce a form of land use control through the idea of liability imposition upon individuals and firms.

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As there is always a divergence between the social costs and private individuals and firms, the liability in case of any damage should be directed towards such individuals and firms engaging in polluting activities as one of the unintended social costs. That is why the article is centered on the harmful effects of business actions on other people. It is thus prudent, for instance, in cases of pollution that limitations be made available to control the use of geographical locations by firms in detriment to the neighboring property owners. The aforementioned liability thus possesses a great implication on the land use controls. A good example is provided where the activities of an individual or a firm can be controlled. In this case, Coase highlights a possible solution to curbing pollution. As a result, two implications in regards to land use controls can be deduced in this case.

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One, the doctor can seek legal redress in the form of damages for the bother. This has the effect of imposing damages on any individuals of firm found in contravention of other people’s property rights. This because the land use controls are primarily initiated to control activities of other people and firms as well as ensuring that they do not disturb the peace of the other people. Another implication will allow for laws to be created in a manner that they will clearly define specific rights and which would be of most value in particular. Therefore, it is doubtless that land use controls must also adhere to rule of the greater good as pointed out in the article. As enumerated in the article, a bargain which Coase explained regarding the costless market transaction (zero transaction costs) is very crucial.

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A bargain is considered important in the article as it provides a platform for efficient resources allocation. About the question “why not just bargain?” bargain are viewed as the best option for resource allocation even above allocation arrived through litigation or any other means. The reason ascribed to this is that resources allocation arrived through private means are regarded to be more socially efficient. In such cases, the necessity of legal framework diminishes. What Coase tried to explain in this case is that the legal outcome should not be based on the rules of fairness and causes, but rather legal analysis should be based on efficiency. Moreover, this paints the government as a super firm which has the power to regulate acts of both individuals and firms, but at the same time, the government is still able to avoid such markets altogether.

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This because the government can offer a more subsidized solution and at a lower cost than would a private sector would do. However, the efficiency, in this case, can only be arrived at through cooperative bargaining. Furthermore, courts have not been mandated to provide precise laws pinpointing liability for damages. Efficiency is a clearly focus that the property rights should strive to achieve and which can be done through land use controls such as zoning. Work cited Coase, Ronald H. The problem of social cost. J.

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