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Legal Terms - Coase theorem
a notion that is frequently used in the *economic study of law. Dedicated to Ronald Coase, the Nobel laureate (1911–2013), it describes
a conclusion that maximizes the net total of social wealth is considered "efficient." The theorem can be used, in particular, to examine the degree to which the rules yield such a "efficient" result in the context of the law of *tort. The Coase Theorem can be summed up simply as follows: whichever legal norm is chosen, the "efficient" outcome will happen under situations with low transaction costs and well-defined property rights. The strategy used by Coase is that a "efficient" regulation is one that minimizes the total of accident costs and preventive costs because such a rule will often diminish societal wealth the least amount of time. However, preventing accidents through safety measures unavoidably incurs costs.
a notion that is frequently used in the *economic study of law. Dedicated to Ronald Coase, the Nobel laureate (1911–2013), it describes
a conclusion that maximizes the net total of social wealth is considered "efficient." The theorem can be used, in particular, to examine the degree to which the rules yield such a "efficient" result in the context of the law of *tort. The Coase Theorem can be summed up simply as follows: whichever legal norm is chosen, the "efficient" outcome will happen under situations with low transaction costs and well-defined property rights. The strategy used by Coase is that a "efficient" regulation is one that minimizes the total of accident costs and preventive costs because such a rule will often diminish societal wealth the least amount of time. However, preventing accidents through safety measures unavoidably incurs costs.
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