Thursday, December 17, 2009

"Coasian Solutions"

I was asked to review a paper for an economics peer-review journal the other day, which included several references to "Coasian bargaining," an abhorrent phrase about which I've already posted (here). The article also referred to another phrase, "Coasian solutions," which, while not as abhorrent, remains mystifyingly vague to me. I've managed to come up with two equally plausible interpretations of its meaning:

1. A "Coasian solution" is simply a voluntary contractual arrangement to avoid or resolve some dispute over entitlements to resources.

2. A "Coasian solution" is a non-viscous liquid that reduces friction, e.g., eye drops.

I prefer the second interpretation because if the first is correct, then all contracts arguably constitute "Coasian solutions," rendering the phrase insignificant. The second interpretation at least has the value of noting that friction matters - in economics as much as in physics - which is something that Coase took pains to point out.

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