What is Coase s The Problem of Social Cost about?

Whether the free market can be traded to the mutual benefit. The transaction itself requires a cost, and Coase underestimated the cost of the transaction.

Summary. Social cost represents the maximum value that can be obtained from a factor of production for a certain alternative use, and it is clear that Coase's social cost is opportunity cost, which is the concept of cost in the usual sense of economic analysis.

What is the question of social costs raised by Ronald Coase? How to overcome this problem?

The social cost represents the maximum value that can be obtained by the factor of production in identifying a certain alternative use, and it is clear that the social cost of Coase is the opportunity cost, which is the concept of Zheng Yan in the usual sense in economic analysis.

The first solution proposed by Coase is that in the case of transaction costs, the essence of the enterprise is an alternative to the best mechanism. In some cases, firms are able to allocate resources more efficiently than market** mechanisms because they reduce market transaction costs. Within the enterprise, the first transaction of various factors of production is replaced by a production plan, and the rearrangement of production takes place.

Going back to the example of cattle breeders and farmers, in the case of transaction costs, there is a high cost of communication and coordination between the two, but if an enterprise is to operate and organize cattle breeding and planting, it will be almost cost-free to rearrange the production area, reduce the mutual damage of business on adjacent land, and there is no need for communication and negotiation, litigation and potato chain and so on. However, as mentioned in "The Nature of the Enterprise", the size of the enterprise is also limited, and there are organizational costs within the enterprise, and when the internal organizational costs are higher than the external transaction costs, the enterprise will stop expanding. Therefore, it is not possible to solve this problem on a single enterprise scale.

If there are multiple enterprises, there will still be business conflicts and transaction costs. Coase proposed the second solution, which is direct control. ** It is no longer a system of property rights (a legal system of rights that can be adjusted through market transactions), but a mandatory dictation of what people must or must not do, and the obedience of those who have no hands on it.

For example, to solve the problem of soot, it is necessary to enact production methods that may or may not be used, or to stipulate a specific scope of business. This is similar to the role of production planning within a company. Unlike enterprises, enterprises need to follow the market rules, and they can use legal agencies such as the police to enforce instructions, which can save a lot of trouble.

Obviously, it is possible to carry out certain activities at a lower cost than other organizations, but the administrative mechanism itself requires a high cost, and the influence of decision-making is political pressure, which is not regulated by the market competition mechanism, and its regulation may not achieve the optimal allocation of resources. Therefore, direct regulation may not be a better solution for businesses and the market. But in some cases, direct regulation can work wonders, as in cases like the soot obstruction, where many people are involved, and the cost of solving the problem through the business and the market is high.

(1) The main contents of Coase's "Social Cost Problem":

The article was published in 1960. This paper re-examines the characteristics of contract behavior when transaction costs are zero, criticizes Pigou's compensatory principle on the problem of "externalities" (** intervention), and argues that market transactions are as effective even in the context of social costs (i.e., externalities) under the premise of clear property rights.

Coase found that once transaction costs are assumed to be zero and property rights (i.e., property rights in operation and operation) are clearly defined, then legal norms do not affect the outcome of contractual actions, i.e., the optimization result remains unchanged. In other words, as long as the transaction cost is zero, then the optimal allocation of resources can be achieved through free trading in the market, regardless of who owns the property.

2) Central theme: Under the conditions of perfect competition, private costs are equal to social costs.

And Coase's idea was named "Coase's theorem" by the University of Chicago economist George Stiegler (winner of the 1982 Nobel Prize in Economics).

Answer] Answer: D

Strictly speaking, externality internalization can only be achieved if the property rights of Zibu Changyuan are determined, such as the property rights of the road space for clearing and widening the road space in the case of congestion. In his article "The Problem of Social Cost", Coase points out that in the absence of transaction costs, regardless of the initial definition of property rights, the transaction of property rights between the entities that produce externalities and those affected by externalities can always achieve optimal use of resources.