The ‘Coase Theorem’ vs. Coase Theorem Proper: How an Error Emerged and Why it Remained Uncorrected so Long

Abstract

The question of what is the 'Coase Theorem?' has no simple answer. The majority of articles covering a variety of issues on the 'Coase Theorem' still misrepresent the main message of Coase (1960). The remaining controversy over the 'Coase Theorem' is because the literature on Coase (1960) has been locked into a pathway which was set out by Stigler’s 1996 book, The Theory of Price. Even almost 50 years after the publication of Coase’s original article, the consequence of the initial condition under which Coase’s contribution was first formulated (Stigler 1966) is not perfectly eliminated. The evolution of the 'Coase Theorem' has now become an example to intellectual path dependence in economics.

Keywords: Ronald Coase, 'The Problem of Social Cost' (1960), The 'Coase Theorem,' George Stigler, Replication Failure, Intellectual Path Dependence

JEL Classification: B25, B31, B41