Coase theorem

Randall G. Holcombe

Chapter 20 in Elgar Encyclopedia of Public Choice, 2025, pp 139-143 from Edward Elgar Publishing

Abstract: The Coase theorem says that in the absence of transaction costs, resources will be allocated to their highest-valued uses. Coase emphasized that when large numbers of people have to negotiate to allocate resources efficiently, it raises transaction costs and stands in the way of efficient exchange. Applied to politics, public policy is made by a small number of political elites who face low transaction costs and negotiate to maximize the value of public policies for themselves. The masses face high transaction costs and are unable to negotiate in the political marketplace.

Keywords: Coase theorem; Political exchange; Transaction costs; Rent-seeking; Political institutions; Elites and masses (search for similar items in EconPapers)
Date: 2025
ISBN: 9781802207743
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