Coasean versus Pigovian solutions to the problem of social cost: the role of common entitlements

Abstract

This paper works towards drawing a proper relationship between the Coasean and Pigovian approaches that should be based on the distinction between individual/private and shared/common entitlements. Because of the specific goals of his work, Coase (1960) does not make an explicit distinction between the two types of property rights; however, there are basic differences in their management, so this distinction is essential. According to Coase, the definition of property rights facilitates the optimal allocation of private entitlements through Coasean bargaining and market transactions. This paper suggests that shared/common entitlements should also be taken into account. The shared/common entitlements alternative is so important that it should be explicitly outlined in Coase's entitlement optimisation assumption. When resources are shared among members of groups and communities, Coasean bargaining and market deals may be carried out only after co-owners organize and collective management is established in order to negotiate the reallocation of entitlements. For Coasean bargaining to take place in these situations, centralized (i.e. Pigovian) rules and regulations should first be adopted by the groups/communities. Hence, in cases of common property rights, the Coasean and Pigovian approaches are complementary to one another. In such cases, Coasean bargaining is not a rejection of centralized Pigovian regulation but is a means to its improvement. And vice versa: relevant Pigovian rules adopted by the co-owners of entitlements are necessary institutional arrangements enabling Coasean market solutions.

Complex private-common property rights in institutional and planning theories

“…Common ownership can be avoided only if one lives alone on an island. In contrast, in urban areas, one unavoidably shares with one’s neighbours and local residents resources such as the environment, open spaces, public greenery, calmness (or urban noises), sunlight, air, road infrastructure and utility networks (Slaev, 2017b). Even private home ownership is not purely private.…”

Managing natural resources: Coasean bargaining versus Ostromian rules of common governance

“…Still, this issue is under-investigated. Coasean bargaining is obviously much more complicated when, instead of just two neighbours, multiple parties are involved (Slaev, 2017b). Consider, for instance, a theoretical situationa number of fishermen and their families live around a lake and make their living by catching fish from this lake, and a company intends to build a factory by the lake, which will pollute the waters.…”

“…Only when the last fisherman has joined the deal has the factory owner indeed acquired the rights to pollute. Yet bargaining with the last fisherman not only is extremely difficult but also qualifies as a market failure, because it is bargaining between a monopolist seller and a monopsonist buyer (Farrell, 1987;Hahnel and Sheeran, 2009;Slaev, 2017b). What is the proper market value of the last fisherman's polluting entitlements?…”

Is Hayek vs Kelsen helpful for planning theory? – A comment on Slaev’s types of planning and property rights by Benjamin Davy

“…These ideas reappear in Slaev’s (2016b: 289–290, 2017a: 956–957, 2017b: 409–410) theory of planning, law, and property rights several times. Slaev (2016a) relies on the juxtaposition of teleocratic planning and nomocratic planning, a concept borrowed from Moroni (2007: 156–157 and 2010), who borrowed it from Hayek (1976) (who borrowed it from Oakeshott).…”

“…Slaev (2016a, 2016b, 2017a, 2017b), professor at the Department of Architecture and Urbanism of Varna Free University, Bulgaria, recently has presented a comprehensive theory of planning, law, and property rights. Readers must keep in mind the full set of papers, although my comment concerns mostly the article on Types of planning and property rights (Slaev, 2016a).…”