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PolySciFi Blog

Tuesday, October 26, 2004

 

For the quizbowl readers

Last night the Coase Theorem came up in trivia practice. In short, the Coase Theorem says that market forces (specifically bargaining sans government intervention) can efficiently resolve any property dispute.

Today Alex Tabarrok on Marginal Revolution notes a situation in Hollywood that's not quite Coase.
While on location in September on Moreno Avenue in Los Angeles' Brentwood neighborhood, a broad street lined with substantial homes, producer Ronald Schwary's location team asked Stefanie and Myron Roth to halt their noisy tree trimming. Some bargaining ensued, and the Roths agreed to send the trimmers away in exchange for $1,000.
A nice efficient bargaining solution with both parties happy. A triumph of Coasian bargaining.
Rather than pay them quickly with a check, Schwary, winner of a best picture Oscar for the 1980 film "Ordinary People," rounded up 100,000 pennies and had them delivered, weeks later, in 20 densely packed bags to the Roths' house.
...The Roths, who said they could not even lift the 30-pound bags, were not amused.
Maybe not such a simple application of Coase.

The longer version of Coase says that bargaining can fail to achieve efficiency in the face of transaction costs. The Roths failed to account for the emotional transaction cost of dealing with Schwary - Schwary's an ass.

Side note: Can't lift 30 pound bags of coins? Myron's an economic girlie man.

(Image shamelessly lifted from The Conspiracy to Keep You Poor and Stupid)

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