ABSTRACT
This paper critically examines the inherent limitations in Coase’s interpretation of social cost and property rights, arguing for a more nuanced understanding that recognizes the integral role of liability rules in shaping socioeconomic activities. Coase’s conception, while instrumental in specific scenarios of resource allocation, exhibits significant oversights. It reduces the complexity of property rights to static givens, overlooking their character as emergent attributes of social relations shaped by rule-following and social interactions. Further, it underappreciates the role of legal liability, a crucial factor in market dynamics. We examine Prominent legal cases such as Donoghue v Stevenson (1932) and Sturges v Bridgman (1879) which serve as illuminating instances of how liability rules directly impact economic activities and social costs. In both cases, clear determination of liability rules not only facilitated resolution of conflicts but also fostered conditions conducive to economic expansion and efficient management of social costs. We try to show that the discovery and the establishment of liability rule far from insignificant; rather, is a fundamental prerequisite for creating an extended legal order that enhances predictability, reduces conflicts, and facilitates efficient economic planning.
Vikramaditya, Vibhu, The Reconsideration of Coasean Social Cost.
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