Is There a Generalized Coase Theorem?

Project Investigator : Der-Chung Hsieh

Collaborator : Bing-yuan Hsiung

        Coase Theorem has been extensively applied in economic and legal studies, but it has seldom been discussed in political science and has almost never been invoked in sociology. An explanation is needed, and it can be related to the question of whether a Generalized Coase Theorem exists. The inquiry looks into several questions: First, Coase (1978) argued that economists enjoy the advantage of having “the measuring rod of money” at their disposal; it will be argued, however, that what is important is not the measuring rod of money per se, but a measuring rod of something that is objective, observable, and acceptable to the individuals concerned. If this measuring rod exists, then the Coase Theorem can be extended to a more general setting. Secondly, it is known that Coase strongly favors the inductive approach, but the inquiry shows that in both the 1960 article as well as his subsequent defense of the Coase Theorem, he adopts a deductive approach. This is in sharp contrast with his stated methodological position and is very different from essentially all of his other writings. Third, that the Coase Theorem has had significantly different impact on different social sciences can be explained by whether interests of the actors can be readily identified in various activities. The Coase Theorem has its greatest impact on studies that focus on activities with clear, concentrated, and piecemeal interests. Finally, the Coase Theorem is most relevant for activities that are repetitive; for activities that involve new events or artifacts, a measure of efficiency is often non-existent and the relevance of the Coase Theorem would therefore be weak.