The Coase Theorem and Arthur Cecil Pigou

Authors

Herbert J. Hovenkamp, University of Pennsylvania Carey Law SchoolFollow

ORCID

Herbert Hovenkamp 0000-0002-4583-5162

Document Type

Article

Publication Date

2008

Abstract

In "The Problem of Social Cost" Ronald Coase was highly critical of the work of Cambridge University Economics Professor Arthur Cecil Pigou, presenting him as a radical government interventionist. In later work Coase's critique of Pigou became even more strident. In fact, however, Pigou's Economics of Welfare created the basic model and many of the tools that Coase's later work employed. Much of what we today characterize as the "Coase Theorem," including the relevance of transaction costs, externalities, and bilateral monopoly, was either stated or anticipated in Pigou's work. Further, Coase's extreme faith in private bargaining led him to fail to see problems that Pigou saw quite clearly and that remain with us to this day.

Keywords

Coase Theorem, Pigou, Social Cost, Law and Economics, Economic History, Legal History, Marginalism

Publication Title

Arizona Law Review

Publication Citation

51 Ariz. L. Rev. 633 (2009)

Repository Citation

Hovenkamp, Herbert J., "The Coase Theorem and Arthur Cecil Pigou" (2008). All Faculty Scholarship. 1785.
https://scholarship.law.upenn.edu/faculty_scholarship/1785