The Problem of Social Cost

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For this assignment I have chosen the article The Problem of Social Cost by Coase, as the author claims that the parties that have the ability to compensate the harm can cause harm by asking the following questions “Should A be allowed to harm B or should B be allowed to harm A?” (Coase 2).

Moreover, another essential claim of the article is the fact despite the restriction of actions applied to any party; both participants of the court discussion might face the beneficial solution. The theme is relevant, as many problems, which cause the harm for the population, occur, and a solution is unclear. The article is worth to be thoroughly analyzed, as it has a sufficient structure of the arguments in the form of examples.

I completely agree with the first claim, as it is apparent that each party has to be responsible for the actions, and, according to the modern, legislation the situation regarding this matter is rather vague. As for the second thesis, I only partly agree with the statement, as nowadays finding a solution is more complex since the transactional costs and organizational issues might occur during the definition of the problem.

The author provides many critical cases to support the first claim. One of them is the example of the train, as it focuses on the fact whether the management of the train can compensate the harm caused by sparkles from the engine (Coase 34). I referred to this example, as it provides sufficient explanation of the issue and is relevant to the modern situation.

The vague legislation is another fact in support of this claim, as even in nuclear industry compensation is enough to continue the operation of the plant (Van Dyke 17). Furthermore, according to the law, the pollution and the harm caused by it can be allocated (Rowell 985). Additionally, this statement is reasonable for the modern companies. As changing the equipment is rather expensive, especially for construction businesses and plants (Alarcón, Rodríguez, and Mourgues 767).

As for the counterarguments for the second claim, some cases are rather peculiar. One of them is the example of rabbits being responsible for damage (Coase 38). Moreover, no legislative acts address, which measures has to be collected to determine the cause of harm to the exact action (Coase 41). Moreover, it is often clear what a primary reason of damage is (Fisher, Lange, and Scotford 55).

Based on the statements, it could be said that mutual benefit is hard to achieve due to the lack of legislation. Furthermore, personal skills have an impact on the final decision. A lack of negotiation skills can be a cause of inability to find a mutual benefit (Mans, Shimshon, and Suramsky 247). Lastly, the author has chosen to describe the idealized world. However, the transactional costs exist in the modern society.

In conclusion, it could be said that the author’s perception is partly idealized, as it contradicts with my personal opinion about the matter. I agree with the first claim, as the law is rather vague, and determinants of the law hardly exist. The second application is inconsistent with the modern reality, as the complexity of the society was not taken into account.

In the end, it could be said that the article has a sufficient central claim, and it is based on strong assumptions. Even though it provides detailed examples, it seems ambiguous while describing some cases. It is simplistic, as it covers all of the defined questions. Nonetheless, the article had a lot of implications for the theory of social cost and was the foundation for the future development in this sphere.

Works Cited

Alarcón, Luis, Andrés Rodríguez, and Claudio Mourgues. “Impact of Machine-Failure Costs on Equipment Replacement Policies: Tunneling Company Case Study.” Journal of Construction Engineering & Management 138.6 (2012): 767-774. Print.

Coase, Ronald. “The Problem of Social Cost.” The Journal of Law & Economics 3 (1960): 588-597. Print.

Fisher, Elizabeth, Bettina Lange, and Eloise Scotford. Environmental Law: Text, Cases, and Materials. Oxford, Oxford University Press, 2013. Print.

Mans, Ulrich, Gideon Shimshon, and Leonard Suramsky. “Training the Warrior-Diplomat: Enhancing Negotiation and Conflict Management Skills through Experiential Learning.” International Negotiations 15.2 (2010): 247-280. Print.

Rowell, Arden. “Allocating Pollution.” The University of Chicago Law Review 79.3 (2012): 985-1049. Print.

Van Dyke, Jon. “Liability and Compensation for Harm Caused by Nuclear Activities.” Denver Journal of International Law & Policy 35.1 (2006): 13-46. Print.

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The Problem of Social Cost

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