Changes

::::: I can also create some additional Coase theorem problems that present a scenario of pollution caused to a third party with a fourth party perhaps existing who can mitigate the pollution most efficiently.  Also, I would like to ask some concept questions on what the Coase theorem is or what it implies and what it is not.  Specifically, I would like to ask:

::::: I can also create some additional Coase theorem problems that present a scenario of pollution caused to a third party with a fourth party perhaps existing who can mitigate the pollution most efficiently.  Also, I would like to ask some concept questions on what the Coase theorem is or what it implies and what it is not.  Specifically, I would like to ask:

::::: "[[President Obama]] has articulated to the American people that a new program called [[cap and trade]] is a market-based way to combat pollution.  Does the Coase theorem justify [[cap and trade]]?  Why or why not?"

:::::: "[[President Obama]] has articulated to the American people that a new program called [[cap and trade]] is a market-based way to combat pollution.  Does the Coase theorem justify [[cap and trade]]?  Why or why not?"

::::: ''No.  The Coase theorem only states that the efficient outcome will be reached regardless of initial property allocation (or legal entitement) when there are zero transaction costs and when there is strong rule of law.  Necessarily of course, these legal obligations can exist only between private parties who are then able to negotiate and bargain freely and in full faith.''

::::::: ''No.  The Coase theorem only states that the efficient outcome will be reached regardless of initial property allocation (or legal entitement) when there are zero transaction costs and when there is strong rule of law.  Necessarily of course, these legal obligations can exist only between private parties who are then able to negotiate and bargain freely and in full faith.''

::::: "Is the outcome generated after implementation of [[cap and trade]] optimal?  Why or why not?"

:::::: "Is the outcome generated after implementation of [[cap and trade]] optimal?  Why or why not?"

::::: ''No. The Coase theorem does not state that the government can arbitrarily set a quota and simply expect that that level would be the optimum level.  Under cap and trade, there is no legal way for private parties to exceed the government quota.  Under the assumptions of the Coase theorem the government never imposes a restriction on pursuing the optimal outcome, just potentially a legal entitlement only between private parties.  For example, the cheapest method to deal with the negative effects of carbon emissions may be to plant trees (or it may even be determined there is only a negligible effect on overall welfare.)  Under the assumptions of the Coase theorem, the polluter may be obligated to pay the specific injured party an arbitrary payment for each unit of pollution.  However then, there exists an infinite number of ways for the private parties to bargain to achieve the optimal outcome, including even the injured party subsidizing the polluter to continue production so he can still receive payments.  A cap, or quota, on emissions leaves private parties no legal recourse to explore these innovative methods of combatting pollution.''

::::::: ''No. The Coase theorem does not state that the government can arbitrarily set a quota and simply expect that that level would be the optimum level.  Under cap and trade, there is no legal way for private parties to exceed the government quota.  Under the assumptions of the Coase theorem the government never imposes a restriction on pursuing the optimal outcome, just potentially a legal entitlement only between private parties.  For example, the cheapest method to deal with the negative effects of carbon emissions may be to plant trees (or it may even be determined there is only a negligible effect on overall welfare.)  Under the assumptions of the Coase theorem, the polluter may be obligated to pay the specific injured party an arbitrary payment for each unit of pollution.  However then, there exists an infinite number of ways for the private parties to bargain to achieve the optimal outcome, including even the injured party subsidizing the polluter to continue production so he can still receive payments.  A cap, or quota, on emissions leaves private parties no legal recourse to explore these innovative methods of combatting pollution.''

::::: I would also like to ask on this specific problem:

::::: I would also like to ask on this specific problem:

::::: "Do your results from the above problem imply that levying a progressive tax on a state or country can ever practically not inhibit efficiency?  Why or why not?"

:::::: "Do your results from the above problem imply that levying a progressive tax on a state or country can ever practically not inhibit efficiency?  Why or why not?"

::::: "What reason or reasons justify the answer that you arrived at in the face of what you know about economics?"

:::::::''No.  The Coase theorem only holds when there are zero bargaining costs and everybody is able to negotiate freely in perfect faith.  In reality, however, if an unproductive class ended up with the best welfare outcome via legal entitelments and bargaining, members of the productive class would probably migrate to the unproductive class.  Thus, the resulting outcome would not be Pareto efficient because the assumption that parties would be able to negotiate in perfect faith is obviously violated.''

::::: "Is there any contradiction between the principles of a free market and the results from this problem?"

:::::: "What reason or reasons justify any apparent contradiction between the principles of a free market and the results from this problem?"

::::: "What perhaps could be gleaned from the results of this problem?"

::::::: ''The Coase theorem only holds under conditions of a strong rule of law and zero bargaining costs.  Currently, these assumptions rarely exist in reality for most economics problems.  Moreover, the main motivation of the Coase theorem was to show that there is an economic efficient way to deal with '''unintentional''' wrongs not cured by law, not to '''deliberately''' pursue unjust legal entitlements just to test whether the Coase theorem will still produce the optimal outcome.  Most of the time, it will not because the assumptions of the Coase theorem cannot be satisfied.''

::::: "Using the concepts you have learned solving this problem, why would a communal society in Acts work efficiently but installing a Communist system not work out?"

:::::: "What perhaps could be gleaned from the results of this problem?"

::::: "What are the implications of the result of this problem in determining whether private charity or public assistance is better?  Is there a situation where private charity be implemented while maintaining efficiency?  What about public assistance?"   

 

 

:::::: "What are the implications of the result of this problem in determining whether private charity or public assistance is better?  Is there a situation where private charity be implemented while maintaining efficiency?  What about public assistance?"   

::::: Hopefully, my clarification helps.  Let me know what you think of these additional problems and if you have any questions.  I'm pretty sure that any serious student of Conservapedia will get the correct answer on most, if not all, of the follow up conceptual questions, though the rationale required may require critical thinking. [[User:Brown25|Brown25]] 18:52, 15 August 2009 (EDT)

::::: Hopefully, my clarification helps.  Let me know what you think of these additional problems and if you have any questions.  I'm pretty sure that any serious student of Conservapedia will get the correct answer on most, if not all, of the follow up conceptual questions, though the rationale required may require critical thinking. [[User:Brown25|Brown25]] 18:52, 15 August 2009 (EDT)