Here is a very brief, highly readable explanation of the critical insight underlying the Coase theorem, courtesy of Larry Solum.

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One Response to “Solum’s Outline of the Coase Theorem”  

  1. 1 Ben Samuel Nelson

    Isn’t that explanation invalid on its own terms? In scenario B, where the plaintiff has to pay for externalities, he also must pay an inducement fee (one dollar, in this example). Isn’t that less “efficient” than scenario A, where the accused has to pay?

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