Talk:Coase theorem

Andy, I was mistaken in stating that the Coase theorem is an appropriate justification for cap and trade, because it is not. The Coase theorem would not interfere with the level of production, just the initial allocation of property. Thus, I'll correct my edits. Your paragraph on excuses is fine. What I will do is maybe expound on some of the things you've written, so that readers can know precisely what the Coase theorem states and what it does not state. Namely, the Coase theorem does not state that there is an interference in the level of production either through a quota or through taxes. The Coase theorem only states that invariance occurs regardless of the initial allocation. FYI, half of Google's sources on the Coase theorem get it wrong. Brown25 00:35, 13 August 2009 (EDT)

I think, though I'm not certain, there is an interesting extension of the Coase theorem. Even if you had a tax on productive behavior from a productive class which was then transfered to an unproductive class and even if flow of these taxes could change direction and were varying based upon arbitrary conditions, so long as the classes are discrete and unchanging in their compositions, the invariance property of the efficient outcome from the Coase theorem would still hold, given the assumptions used in the Coase theorem. Amazing, though I'm not implying I would ever endorse such a policy, namely because such circumstances would never exist in the real world, it rewards laziness and lack of prudence, and even a minor misunderstanding of this line of thinking could lead to frankly Communistic policies. Thus, I want to be and will be very careful in how I approach this in the mainspace. Brown25 22:06, 13 August 2009 (EDT)

There is still much to be gleaned from the Coase theorem and I look forward to discussing and developing it further with you. That said, I think taxes are a form of transaction costs and thus do interfere with an efficient level of activity. If an owner of a railroad is taxed nearly 100%, then he will run the railroad less than if he's taxed at a reasonable rate, or at no rate. Everyone is worse off then.--Andy Schlafly 22:46, 13 August 2009 (EDT)

Your statement is absolutely correct. I was thinking about a situation, so hypothetical, that it would never occur in the real world. My assumptions for this problem that I was playing around with last night are as follows:

1. There are two people in this society only.

2. Each person has 100 units of value currently.

3. One person is called Hard Worker. If Hard Worker works he can earn 20 units of value. After each successive day, this potential drops by 1 unit of value. He would give 2 units of value to have the day off (leisure).

4. The second person is called Lazy Man. If Lazy Man works he can earn 10 units of value. After each successive day, this potential drops by 0.5 units of value. He would give 8 units of value to have the day off (leisure).

5. There is a a code in this society that requires an 80% tax on gross earnings. The tax receipts are then redistributed equally among the persons.

6. Gifts can be exchanged among members and agreements made, but are also taxed at 80%.

7. Hard Worker and Lazy Man can communicate and negotiate freely.

The question is, under these circumstances, what will be the equilibrium level of output, in days worked, for Hard Worker and Lazy Man? What will be the final wealth of Hard Worker and Lazy Man? What will be the equilibrium level of output, if there was no redistribution of earnings? What will the final wealth then be of the two persons? Now presume that Lazy Man is no longer lazy. He now only values leisure at 1 unit of value. Solve this problem under both the conditions of redistribution of wealth and no redistribution of wealth.

I will post the answers I got for this problem tonight hopefully. Brown25 16:23, 14 August 2009 (EDT)