SOME UNEASINESS WITH THE COASE THEOREM

Allocation of property rights - and how they are to be defined - has important economic implications. Only in certain Santa Claus situations - constant returns to scale, infinite divisibility, free entry, dispersed ownership of each grade of factor, shared knowledge, complete markets - only then will Smithian self-interest be compelled to achieve Pareto-Optimality, To try to capture all that which contributes to deadweight loss under the verbal rubric of ''transactions costs'' weakens a useful concept without gaining understanding of incompleteness of markets, asymmetries of information, and insusceptibilities of various technologies to decentralized pricing algorithms.