Had a rather confusing 203 tutorial today, was thinking about the concepts after class and I feel there have may have been some errors of intepretation regarding Coase's theorem made in the tutorial.
The first error I believe was to center the discussion around the issue of transaction cost being 0, I feel that transaction costs being 0 is an ideal and not possible (I believe Coase also knew this). Transaction costs are not 0 because of social norms, which supposedly then according to Coase's theorem makes the law redundant and toothless.
To say that transaction costs are zero because there are for example social norms in place, is an error, for firstly even if hypothetically i am gd friends with my business partner or there are social norms governing transactions, there is still potential for him to cheat me, going back to Granovetter's argument. Therefore the transaction cost in enforcement cannot be 0. Therefore the discussion had been misleading. Transaction costs can be low but never zero.
What I believe would be a better understanding of the issue would be to look at Coase's theorem in the reverse. That because there is no 0 transaction costs, the most efficient way to handle 'deals' between parties would be to enforce or govern it through the use of laws. Therefore when transaction costs are not 0 any change in the rule of liability will affect the efficient allocation of resources, as the laws will be governing and enforcing what ever dealings betwen parties. Thus parties will be compelled to for example using Coase's parable, set up more fences.
What Ellickson now asserts in my opinion in his paper is that, it is not necessary neither is the assumption that laws are the most efficient way in which 'deals' are carried out but rather norms serve the purpose too. Therefore with norms in place the law becomes redundant as people ould rather settle out of court, bringing to the conclusion that with high transaction costs the change in the rule of law has no effect on the efficient allocation of resources, using Coase's parable- because of soicial norms people do not have to set up more fences as they have their own way of settling disputes which does not compel this action.
Thus to conclude what is the difference between Coase and Ellickson is that, Coase believes with transaction costs, the best way to deal with 'deals' is through the use of laws while Ellickson says that norms can replace laws and become the mode in which people 'deal' in the presence of transaction costs.
I have looked at this argument by placing Ellickson assertion and Coase's theory in the same context- assuming Transaction costs being high for both assertions, and I believe it ould be more fruitful to compare the two ways of thinking in this way.
Lastly I believe that Coase did not take transaction costs being 0 as being due to norms or whatever social relations may have been in place but rather it being an ideal hypothetical case, thus to debate about transaction costs being 0 as what happened in tutorial and to attribute it to norms was errornoes and futile.This is my take I just had to get these thoughts out of my mind, I am not maintaining that I am right just giving my opinion. Welcome to debate with me on this.
Just trying out picture posting on my blog
Pictures taken on my beloved Motorola Pebl's VGA camera which is sooooooooooo sharp and clear
This is not an emo blog, for me to like tell all my troubles and whatever shit thats been bothering me.
Thats like so not me, I named this blog after the Beatle's song While my Guitar gently weeps by George Harrison and the last time I checked the Beatles don't do no of that emo crap.
Anyway heres a clip of the late George and ERic Clapton on lead with that Huge Gibson....
Its weird how in the first post I stated that I write such that I would not forget, when its really not possible.
For what you are now is forever lost in time, nothing you can do will allow you to relive that past again.
What I think and feel when I write something ten minutes ago cannot be the same as what I think and fell now.
Even the words I use to convey a certain meaning now, may not adequately express the real meaning of this particular moment in a different time.
Everything is sacred in the now.....
I write such that I will never forget
who I was, what I felt
I write such that I will always remember
the times that have gone, lest they fade into oblivion
" Morning is when i am awake and there is a dawn in me. Moral reform is the effort to throw of sleep. Why is it that men give so poor an account of their day if they have not been slumbering? They are not such poor calculators. If they had not been overcome with drowsiness, they would have perfomed something. The millions are awake enough for physical labor; but only one in a million is awake enouogh for effective intellectual exertion, only one in a hundred millions to a poetic or divine life. To be awake is to be alive. I have never yet met a man who was quite awake. How could i have looked him in the face? "
Walden, Henry David Thoreau