Questions on Last Week
Questions on Last Week
Questions on "The Problem of Social Cost
Questions on “The Problem of Social Cost
"Externalities"are Jointly Caused
“Externalities” are Jointly Caused
Price Theory Framework Cost of inputs=their value in the best alternative use Price of outputs=their value to those who buy them
Price Theory Framework • Cost of inputs=their value in the best alternative use • Price of outputs=their value to those who buy them
Farmer and Rancher If Rancher liable for damage to crops If Rancher not liable If no bargaining possible
Farmer and Rancher •If Rancher liable for damage to crops •If Rancher not liable •If no bargaining possible
Basic Argument With zero transaction costs,it never pays to leave money on the table
Basic Argument • With zero transaction costs, it never pays to leave money on the table
More Cases,the Same Logic Confectioner vs Doctor Bleaching Coconut Matting Blocking the draft of a chimney ·Jolly Angler Brewing
More Cases, the Same Logic • Blocking the draft of a chimney • Bleaching Coconut Matting • Confectioner vs Doctor • Jolly Angler Brewing
Judge Uke Story The sound of the money pays for the smell of the food
Judge Uke Story • The sound of the money pays for the smell of the food
If Transaction Costs are Not Zero
If Transaction Costs are Not Zero
Judge's Basis for Deciding the Case May Seem Irrelevant to the Economist But It may be designed to give a predictable rule Or be a proxy for relevant considerations
Judge’s Basis for Deciding the Case May Seem Irrelevant to the Economist But •It may be designed to give a predictable rule •Or be a proxy for relevant considerations
