The Curious Treatment of the Coase Theorem in the Environmental Economics Literature, 1960–1979

Coasean bargaining in the presence of Pigouvian taxation

“…Our results show that, in a costly Coasean environment, a pre-existing 2 For a recent discussion on Coasean and Pigouvian perspectives see Anderson and Parker (2013) and Banzhaf et al (2013). For a general analysis of the 'Coase Theorem' see Schweizer (1988) and for an application to environmental economics see Medema (2014).…”

“…Such a prima facie conclusion is unwarranted. As outlined by Medema (2014), there is little in common with the existence of a cap-and-trade market and the bilateral bargaining procedure discussed in Coase (1960).…”

A. V. Kneese’s Water Quality Management Research (1960s), Within the History of Environmental Economics

“…Much of Kneese’s most important work concerned water quality management; yet whenever his early works in that area are discussed, distinctions between them and the Pigouvian tradition have tended to be ambiguous and thus remain unclear (e.g., Baumol and Oates 1988; Cropper and Oates 1992; Fisher and Peterson 1976; Kolstad 2010; Røpke 2004). For example, Anthony Fisher and Frederick Peterson (1976)—which is “a survey article that may be characterized as the first state-of-the-art presentation of environmental economics” (Medema 2014a, p. 43)—argued that, in Kneese (1962, 1964) and Kneese and Blair Bower (1968), “Kneese is the first economist after Pigou to treat externalities analytically and, at the same time, express a serious concern for pollution” (Fisher and Peterson 1976, p. 12). And in the same discussion, the authors considered Kneese’s “explicit use of the Pigouvian externality framework” to be among Kneese’s major contributions.…”

“…To the purpose of this article, comparisons between Kneese and three other important figures in the history of environmental economics—Krutilla, Ronald H. Coase, and Elinor Ostrom—help distinguish Kneese’s contributions, as discussed in section V. By focusing on the relationship between Kneese’s arguments and those of Krutilla’s non-market value (Banzhaf 2016; Hanemann 1992, 2006) and Coase’s “comparative institutional approach” (Medema 2011, 2014a, 2014b), it can be more clearly understood how Kneese’s argument was positioned in the history of environmental economics. And by discussing the relationship between Kneese’s argument and Ostrom’s argument about “self-organizing and self-governing institution” or “Commons,” which has much more presence in both modern environmental and ecological economics, it can be more distinctly revealed how Kneese’s argument has implications for modern environmental and ecological economics.…”

Coasean Bargaining to Address Environmental Externalities

“…2Coase (1960). See also elaboration on some key issues inCoase (1992) Medema (2011Medema ( , 2014. describes the origins of the Coase Theorem as well as its interpretation.3 The classic discussions are inPigou (1932),Scitovsky (1954), andSamuelson (1948, 208).4 Regulation and taxes are discussed interchangeably here, although there can be important differences(Weitzman 1974).…”