Additional notes on market failures and Coase's Theorem

I have not found an online source of "School's Brief: Of Bees and Lighthouses" The Economist (Feb. 23, 1991), pp. 72-73.  However, here are additional discussions that might be useful:

"Ronald Coase ... won a Nobel prize for his work on externalities ... he argued that, so long as property rights are clearly established, externalities will not cause an inefficient allocation of resources. In fact, few economists would agree: in many cases, unavoidably high costs will prevent the necessary transactions from taking place. Even so, Mr Coase’s insight was fruitful. Markets find ways to take account of externalities - ways to "internalise" them, as economists say, more often than one might think.
Bees are to externalities as lighthouses are to public goods. For years they served as a favourite textbook example. Bee-keepers are not rewarded for the pollination services they provide to nearby plant-growers, so they and their bees must be inefficiently few in number. Again, however, the world proved cleverer than the textbooks. Steven Cheug studied the apple-growers of Washington state and discovered a long history of contracts between growers and beekeepers. The supposed market failure had been effectively - and privately - dealt with."
(The Economist, February 17th 1996, p.67)

"Efficient at What?" by Mark MacCallum, of the New Zealand Ministry of Justice, September 1997.  Available at: two has a good discussion of what MacCallum describes as the "bargaining-and-efficiency" version and the "neutrality" version of Coase's Theorem.  These are roughly equivalent to what I call Coase's first and second conjectures.

Actual (no kidding!) lighthouses for sale in the U.S.:  Information on the National Historic Lighthouse Preservation Act of 2000.  Tentative list of lighthouses available October 2002.

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Last updated: 12 Oct 2004