Coase v. the Coasians

Simon Johnson and Andrei Shleifer

No 7447, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The Coase theorem implies that, in a world of positive transaction costs, any of a number of strategies, including judicially enforced private contracts, judicially enforced laws, or even government regulation, may be the cheapest way to bring about efficient resource allocation. Unfortunately, some Coasians have ignored the possibility that the last of these strategies may sometimes be the best. This paper compares the regulation of financial markets in Poland and the Czech Republic in the 1990s, when the judicial systems remained underdeveloped in both countries. In Poland, strict enforcement of the securities law by an independent Securities and Exchange Commission was associated with rapid development of the stock market. In the Czech Republic, hands-off regulation was associated with a near collapse of the stock market. These episodes illustrate the centrality of law enforcement in making markets work, and the possible role of regulators in law enforcement.

JEL-codes: D73 D78 (search for similar items in EconPapers)
Date: 1999-12
New Economics Papers: this item is included in nep-cdm, nep-env, nep-ind and nep-pub
Note: CF PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as Edward Glaeser & Simon Johnson & Andrei Shleifer, 2001. "Coase Versus The Coasians," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 853-899, August.

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Working Paper: Coase v. the Coasians (1999)
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