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The Economics of Transaction Costs pp 41–59Cite as

Palgrave Macmillan

Economic Externalities

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Abstract

The issue of the uncompensated effects of one party’s actions on another is generally the source of several legal and economic problems. Historically, Pigou (1932) was among the first to address the problem, and he suggested that the damage should be assessed and paid for by the party causing such effects. Pigouvian tax in the public policy context equates the levy of tax at that level for activities such as pollution. Coase (1960), on the other hand, seeks a bargaining solution and assignment of property rights in order to solve the problem of externalities in a decentralized and efficient manner. Since Coase’s theorem has been a very important finding in the literature of economics, and since it rests on a number of explicit and implicit assumptions, it is proposed to examine almost all of the important facets of the results in this chapter.

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Authors and Affiliations

  1. Global Development Institute, New Jersey, USA

    P. K. Rao (Director)

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  1. P. K. Rao
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© 2003 Krishna Rao Pinninti

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Rao, P.K. (2003). Economic Externalities. In: The Economics of Transaction Costs. Palgrave Macmillan, London. https://doi.org/10.1057/9780230597686_3

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