Theories

Question 1

Coase Theorem

Answer 1

When transaction costs are zero, an efficient use of resources results from private bargaining, regardless of the assignment of property rights

Universality: Everything should be private, unless it can be shown that consumption by one person does not impair the consumption by others

Exclusivity: To the extent it is feasible, all resources should be owned by one entity (As opposed to concurrent ownership due to the transaction costs)

Transferability: Things should be freely transferrable/alienable
Exceptions: E.g., voting rights

Question 2

Normative Coase Theorem

Answer 2

The law should be structured to encourage agreements

Externalities should be reduced

Transaction costs should be minimized (because of the Positive Coase Theorem)

Question 3

Positive Coase Theorem

Answer 3

In the absence of transaction costs, it does not matter who starts with the legal entitlement to a resource; that entitlement will always be transferred to the highest value user

Question 4

Hobbes Theorem

Answer 4

The law should be structured in a way that minimizes failure of private agreements
If parties cannot agree on ownership, then it should go to the person who values it most

Question 5

Bentham’s Definition of Property

Answer 5

Property is a legally protected expectation that one will be able to draw advantage from a resource, and as such property is a legal relationship between persons with respect to that property

Question 6

Tragedy of the Common

Answer 6

Situation in which individuals with access to a public resource act in their own interest and ultimately deplete the resource (e.g., overfishing the oceans)

Question 7

Tragedy of the Anti-Commons

Answer 7

Coordination breakdown in which a commons does not emerge, even when general access to resources or infrastructure would be a social good (e.g., open air kiosks but empty stores because of Communism)