| | The '''Coase theorem''' states that if property rights are well-defined and [[transaction costs]] (including costs of negotiating) are zero or negligible, then the most efficient economic activity will occur regardless of who initially owns the property rights. Negotiation and market transactions will ensure optimal allocation of property. Simply put, '''''it means "build a better mousetrap, and the world will beat a path to your door,"'''''<ref>The phrase is attributed to [[Ralph Waldo Emerson]], who said something similar.</ref> '''''no matter who or where you are'''''. | | The '''Coase theorem''' states that if property rights are well-defined and [[transaction costs]] (including costs of negotiating) are zero or negligible, then the most efficient economic activity will occur regardless of who initially owns the property rights. Negotiation and market transactions will ensure optimal allocation of property. Simply put, '''''it means "build a better mousetrap, and the world will beat a path to your door,"'''''<ref>The phrase is attributed to [[Ralph Waldo Emerson]], who said something similar.</ref> '''''no matter who or where you are'''''. |
| − | This simple theorem, first published in a 1960 paper<ref>Ronald H. Coase, “The Problem of Social Cost,” 3 J. Law & Econ. 1 (1960)</ref> by [[Ronald Coase]] who won the Nobel Prize for Economics for this in 1991, has powerful implications for economics, law, politics, and even [[Christianity]]. This theorem supports conservative interpretations of the [[Chicago School of Economics]]. | + | This simple theorem, first published in a 1960 paper<ref>Ronald H. Coase, “The Problem of Social Cost,” 3 J. Law & Econ. 1 (1960)</ref> by [[Ronald Coase]] who won the Nobel Prize for Economics for this in 1991, has powerful implications for economics, law, politics, and even [[Christianity]]. This theorem reinforces teachings of [[Jesus]], such as the parable of the sprouting seed,<ref>Mark 4:26-29.</ref> and supports [[conservative]] interpretations of the [[Chicago School of Economics]]. |
| | The implications in law are that the best a judge can do for the economy as a whole is to minimize transaction costs, such as bureaucracy. Court decisions that impose additional procedural obligations, such as ''[[Goldberg v. Kelly]]'' (1969), can only detract from overall wealth and efficient economic behavior. The Coase theorem implicitly holds that many of the legal attempts to improve the economy are illusory, because there is no way to improve over the combination of clear legal entitlements and no government interference. | | The implications in law are that the best a judge can do for the economy as a whole is to minimize transaction costs, such as bureaucracy. Court decisions that impose additional procedural obligations, such as ''[[Goldberg v. Kelly]]'' (1969), can only detract from overall wealth and efficient economic behavior. The Coase theorem implicitly holds that many of the legal attempts to improve the economy are illusory, because there is no way to improve over the combination of clear legal entitlements and no government interference. |