EC 045 Lecture Notes - Lecture 5: Thought Experiment

• School: University of Vermont
• Department: Economics
• Course: EC 045
• Professor: Catalina M Vizcarra

Document Summary

Farmer"s rights- trespassers are liable for the damage they do. Rancher"s rights- cattle ranchers have no legal duty to supervise their cattle. When transaction costs are 0, an efficient allocation of resources will obtain- regardless of the law. Coase theorum- the assignment of property rights always matters for the distribution of wealth. Coase treats externalities as a problem that involves conflicting rights. Economies that experience much less negative economic growth. Rich and vibrant societies with lots of organizations. Widespread impersonal social relationships, rule of law, secure property rights. Rents refer to incentives, and are not essential for the open access order to work. They agree to divide their realm in two parts, one controlled by each, and respect each other"s rights. If each captures larger rents when there is no infighting: self enforcing contract. In order to capture rents they rely on a coalition of specialists in other areas and share rents.