NDLI: Political Coase Theorem

Content Provider	Springer Nature Link
Author	Parisi, Francesco
Copyright Year	2003
Abstract	This article considers theapplicability of the Coase theorem (in bothits positive and normative formulations) tothe political market. The articleanalogizes the choice of decision rules inthe political market to the choice of legalrules in the traditional Coase theorem andfurther analogizes alternative initialcoalitions to the different initialallocations of entitlements considered byCoase (1960). On the basis of theseanalogies, the paper examines the relevance(or lack thereof) of alternative votingrules and initial coalitions on the finalpolitical outcome. The article furthershows that, if all voters are allowed toenter into Coasian bargaining over thepolicy outcome to be adopted by themajority coalition (i.e., if politicalbargains are possible and are enforceable),uniqueness and stability are obtained. Theanalysis of the axiomatic Nash bargainingequilibrium yields an interesting geometricintuition. If voters have similar utilityfunctions centered around different idealpolicy points, the Coasian bargaining willbe conducive to the ``center of mass'' of thepolicy space, which weighs the agents'preferences as revealed in the bargainingprocess. Such ideal equilibrium satisfiesmost criteria of social welfare. Thearticle concludes considering the variouspractical limits of this ideal politicalmarket, whenever collective action andagency problems affect the politicalbargaining in a representative or directdemocracy. With all side payments prohibited,there is no assurance that collectiveaction will be taken in the most productiveway. (James M. Buchanan and Gordon Tullock, 1962)
Starting Page	1
Ending Page	36
Page Count	36
File Format	PDF
ISSN	00485829
Journal	Public Choice
Volume Number	115
Issue Number	1-2
e-ISSN	15737101
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	2003-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Public Finance & Economics Political Science
Content Type	Text
Resource Type	Article
Subject	Sociology and Political Science Economics and Econometrics

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