Friday, December 25, 2009

Externalities, Noisy Kids, and the Coase Theorem

From the way this video from 20/20 begins, you'll think that the Coase Theorem is a Nobel fraud, as you watch no one say anything to the out-of-control kids in a restaurant.

But even though none of the other diners gets involved, weighing their own personal benefits against costs, it turns out there is a bargain to be struck after all--though some are not happy about how things turn out.

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