Coases Theorem of Coase and Cattle
After familiarizing myself with Ronald Coases theory of economic efficiencies in economic externalities, I have discovered that Coases theorem is greatly debated amongst scholars who study law and economics. I have discovered the two schools of legal thought which are torn apart because of their opinion on the validity of Coases theorem. Basically, Ronald Coase declared that when there are no transaction costs, bargaining between neighbors will lead to an efficient outcome, regardless of the laws on property rights. The theorem is saying that when the transaction costs are low and somebody trespasses onto anothers property, in this case, cattle, neighbors are more likely to resolve the dispute by forgiving the trespass or by repaying the trespassed with a small reward. Since he has made it clear that this theory works when transaction costs are low, I agree absolutely with Ronald Coase. Ronald Coases theory that, when transaction costs are minimal, bargaining powers of people will result in an efficient outcome is correct.
