Summary
The article The Problem of Social Cost by Coase is summarized. As for the first, thesis statement, it could be said that the author focuses on the fact that whether who is guilty of the possible harm and what damage is allowed by the legislation (Coase 2). Moreover, the author suggests that both participants of the situation might benefit their production processes. This position will help both members of the conflict maximize their production costs and improve their economic situation (Coase 8). Additionally, the author evaluates legal factors, which might have an individual contribution to the result of the situation. It could be said that the primary purpose of the article is to summarize and evaluate the current situation regarding the nuisance and propose a potential approach to improve the current state.
Main body
It could be said the all of the thesis statements are evaluated and discussed with the help of the particular examples, as it helps see the image in detail. As for the support of the first thesis statement, one of the examples is the fact that the initial damage was caused by rabbits (Coase 38). Other examples are also provided, but it is the most memorable one.
As for the second claim, it could be said that it is also supported with the help of real cases. One of them is the situation, which occurred between the doctor and a producer of sweets (Coase 8). Another example is related to the conflict between a farmer and a cattle-raiser (Coase 2). The author claims that both of the participants in the conflict can benefit from the situation, and the allocation of their resources does not have a significant impact on the outcome of the case. With the help of these examples, the author proves the fact that the pricing system with liability for damage and a pricing system with no liability have the same outcomes (Coase 8). However, the author discovers examples, in which not transactional costs exist.
It could be said that the last theme discussed in the article plays an essential role regarding the idea of the formation of this matter. Sometimes the decisions made in the court could be considered irrelevant since they do not improve the economic situation of both participants. The author provides several examples of judicial decisions and in the end evaluates them to find the solution to this issue. One of the aspects, which the court systems lack is the fact that it is impossible to estimate the exact damage caused by a particular nuisance (Coase 42).
Conclusion
In conclusion, the author suggests the possibilities to change the approach to reach better results. Firstly, the differences between the perceptions of lawyers and economists are rather dissimilar regarding this matter, as economists use the opportunity cost for the evaluation (Coase 43). The author suggests if legal institutions were discovering the term in the broader context, this fact would help improve the conditions of the current situation. Secondly, the misconception can be reduced with the assistance of the introduction of a different approach, such as the ability to discover the business property, not as a physical location.
However, the legal system has also to evaluate the possible actions, which the business is eligible of doing. Furthermore, “if factors of production are thought as rights”, it will help enhance the understanding of harmful actions, as they are also factors of production (Coase 44). Lastly, the author mentions that different transactional costs, such as “operating the various social arrangements” and “involved in moving to a new system” have to be taken into account (Coase 44).
Work Cited
Coase, Ronald. “The Problem of Social Cost.” The Journal of Law & Economics 3 (1960): 588-597. Print.