The Coase Theorem Explained: Coasean Bargaining Definition, Conditions/Assumptions and Examples

There are quite a few Coase theorem fans among those who believe in less government involvement in our day-to-day affairs and as the name "Coasean bargaining" suggests, we are basically looking at a theorem which states that win-win negotiation is a superior option than the alternatives (parties suing one another, for example) when certain conditions are met.
However, as Ronald Coase himself made clear, the "when certain conditions" are met part represents the tricky dimension.
As explained in this video, the specific assumptions/conditions found in the Coase Theorem are oftentimes not exactly all that relevant to the real world. As such, while Coasean bargaining as a model may seem impeccable on paper, there can be a world of difference between that and examples that pertain to the real economy.
From the definition of Coasean bargaining to Coase theorem conditions and assumptions as well as examples, we've covered everything in approximately one minute.
All in all: is the Coase theorem perfectly applicable to the real world?
Most definitely not but it is most certainly worth including in your (economic) arsenal because considering it useless would be equally wrong :)

[@OneMinuteEconomics]

GiganticWebsites.com is a project through which I make it possible for people to build truly gigantic websites (thousands of articles each!) at ridiculously low prices. If you have a great domain you want to turn into an amazing website or an existing site you'd like to upgrade/scale, visit our website or check out the One Minute Economics presentation video below:
ruclips.net/video/gE8yEOQFMvo/видео.html
Please note that this comment is not an ad for a third-party service provider. GiganticWebsites.com is my baby 100% and I will personally be involved in each and every project so as to ensure the website turns out great :)

[@Ls-jz7xe]

Economics - The subject of naming simple things and concepts that do not need explaining just to make you memorize names of theorems.

[@OneMinuteEconomics]

Not sure if you were defining school or economics :P

[@Victoriakid1012]

Thanks for a simple and straight-to-the-point video. I'm taking PAD-251 right now and every article I find online makes it extremely difficult to understand.

[@erobos111]

An associate of mine asked me to look into this "Coase Theorem" idea and I really don't have lots of time to devote to this subject, so thank you for making this fun, informative anime about it. Very well done!

[@OneMinuteEconomics]

Thanks a lot for taking the time to say something positive, really appreciate it :)

[@laurenyoung7063]

Thank you!! I am a 1L law student and this helped explain a contracts concept I was having such a hard time understanding!!

[@OneMinuteEconomics]

Awesome, happy to hear that Lauren! :)

[@SuperDoge]

Short and concise! Well done!

[@OneMinuteEconomics]

Thanks so much for the kind words, comments like yours mean way more to me than people realize :)

[@OneMinuteEconomics]

One Minute Economics needs your help! Please give me a minute (heh) of your time by watching the following video if you find the channel useful, literally anyone can help (either financially or by spreading the word about my work): ruclips.net/video/io04ckq1X1M/видео.html

[@florentin4061]

A better alternative would be the pigouvian tax, or what do you suggest?

[@dostthouevenlogicbrethren1739]

your analysis is based on the current system of legality which doesn't uphold Coasean property rights under law. This was entirely the purpose of common law under traditional systems. British courts, to this day, do not use actual judges in courts to handle such small matters. They use voluntary public servants who fill in in these cases that don't require a judge. They are called Magistrates. Their sole purpose was in handling these sorts of claims. It was government regulations and bylaws in the first place that created the legal nightmare involved in dealing with these issues in court, that render Coase theorem difficult to work out. The solution isn't more government regulation and intervention to fix the problem created by government regulation and intervention, imposed to solve an issue that doesn't exist without government intervention and regulation.
Put it simple: Politicians get elected for the purpose of imposing regulations on externalities that favour those whom they seek to gain the votes of. It therefore, should come as no surprise that these politicians will seek to externalize issues as much as they can, in ways that will allow them to hold office. Reduce bureaucracy and government intervention, give back property rights to individuals, and let the courts utilize proper common law, and the Coase theorem will be able to function with profoundly more successful outcomes than modern bureaucracy does...and at marginally less cost. Assuming that the cost of Coasean intervention would be higher than our current government intervention is fundamentally flawed. Government intervention is profoundly costly, and not only because it consumes more money in creating departments to deal with these issues, but also in that it incentivizes people to not fix the issues in the first place. Public Choice Theory tells us that removing the motivation to seek profits, an organization will seek to satisfy their internal desires: keeping the employees happy, paid, and working with as little work as possible.

[@OneMinuteEconomics]

I agree 100% that it would be foolish to state that just because the Coasean approach is anything but status quo at this point in time, it cannot work under other political systems. However, at the same time, I do have to point out that while a compelling libertarian case can be made (you've done just that), there's little in the way of even reasonably decent empirical validation. So far at least. While this lack of "evidence" should not lead to a "there's no evidence, therefore it isn't possible" conclusion which would make little logical sense, I believe it's equally premature to draw conclusions in the opposite direction. Personally, I just accept that "we don't know" will just have to do in cases such as this one.

[@subrotochatterjee5788]

One Minute Economics The creation of government presents problems: One, We need the government to protect us (citizens), and this creates the second problem of asymmetric power distribution, with the governments holding the upper hand. In theory, the citizens hold the upper hand, but in reality, it’s the government. We know this. Self-serving politicians and citizens keep this imbalance alive, albeit unwittingly. Who wins if Coase’s theorem actually works? Evidently, it’s those who are willing to go through its gamut. Inequity, perceived or otherwise, greed, and dissatisfaction generally drives the legal system and governments to nix the Theorem.

[@ThePeterDislikeShow]

Could coase theorem be used to negotiate vacation and working hours between coworkers? E.g., in theory you could decide who needs the time off more by having a market for it.

[@sylwester6601]

super helpful, thanks so much!

[@OneMinuteEconomics]

You're more than welcome Sylwester, really glad you found the video helpful! :)

[@andrewscott864]

Great video

[@OneMinuteEconomics]

Thanks Andrew :)

[@leasyy__1483]

THANK YOU!

[@OneMinuteEconomics]

Thank YOU for taking the time to write a supportive comment :)

[@chakraqi6887]

Something there

[@kevyhot]

Thank you so much

[@OneMinuteEconomics]

You are more than welcome :)

[@anjaleemadhushanip.k2964]

Thanks a lot.

[@OneMinuteEconomics]

Thank YOU for the kind words Anjalee :)

[@siljo.]

didn't know Jesse Eisenberg taught Economics

[@OneMinuteEconomics]

Step 1) Googled the name "Jesse Eisenberg" since I had no idea who that was
Step 2) Realize he's the guy who played Zuck
Step 3) Internet points granted :)