Economics Externalities Questions
The Coasean solution refers to an economic concept developed by Ronald Coase, which suggests that in the presence of externalities, private parties can negotiate and reach an efficient outcome without government intervention, as long as property rights are clearly defined and transaction costs are low. According to Coase, if property rights are well-defined and transaction costs are minimal, parties affected by externalities can negotiate and internalize the costs or benefits of the externality, resulting in an efficient allocation of resources.