Kathy G worries that I failed to point out that perfect Coasean conditions never hold in the real world. This is absolutely correct. There are also no universes composed entirely of two identical spheres. Additionally, the inalienable rights with which all men are self-evidently endowed are frequently, in practice, alienated. I regret the omissions.
Kathy G. is further confused by the concept of "preference maximization". Often when I speak to non-economists, I try to explain things in the terms that they are most likely to understand, rather than the terms that appeared in my Micro textbook. I find this helpful, because almost none of them have read my Micro textbook. Luckily, the person I was talking to was not among those who failed to understand what "preference maximization" meant. Indeed, so far as I can tell, Kathy G. is an army of one in this respect. But confess I have not done a comprehensive research survey; I am relying entirely on the absence of confused emails, comments, or blog posts from anyone besides Kathy G.
For those who, like Kathy G, did not understand it the first or second time, the idea is that absent transaction costs, no matter who you endow with the initial bargaining right, the person with the strongest preference will end up with that preference satisfied. I regret the lack of clarity.
Kathy G additionally says I should have specified that Coasean bargaining is impractical in the absent of clear property rights. I thought that went without saying, since the discussion revolved around who had a clear property right. I regret the error.
Kathy G. avers that the Coase Theorem does not "dictate" anything. Please white out the word "the Coase Theorem dictates" on your screen and replace with "the Coase Theorem would seem to indicate". I regret the infelicitous choice of words.
Finally, Kathy G. says that I should not have tried to apply the Coase theory willy nilly to the real world. This is a very important point. Unless you are a trained economist, like Kathy G., the safest thing to do is only apply it to imaginary worlds. For instance, the sort of world that you are usually discussing when you speculate on the wisdom of giving people unlimited rights in either noise, or the freedom therefrom. I regret any injuries, financial setbacks, broken friendships, harsh words, marital problems, community board showdowns, lawsuits, or blood feuds that may have resulted from unwise attempts at home Coasean bargaining.
It's said that one shouldn't blog angry or drunk.
I'm thinking you've got a twofer here. Makes for a great read though.
PS. I know, Kathy G, I shouldn't use the passive voice. Feel free to use a sharpy on the screen and replace "it's said" with "some say", "the saying goes", or whatever else strikes your fancy.
Nessuno, you need to apologize to Kathy G. for spelling Sharpie wrong. And you forgot to capitalize!
I think you're only attacking Kathy G. because she's a woman.
It's Friday!
I do wonder if the Coase Theorem doesn't leave out the possibility that one of the participants is gaming the system.
Isn't is possible for one of the parties to pretend to have strong preferences in order to force the other party to spend effort combatting them?
Let's say I don't really mind music, but I act like I really hate it and force my cell mate to pay me so that he may play it?
Luckily, the person I was talking two was not among those who failed to understand what "preference maximization" meant.
You really should take a moment to proofread before posting, especially when the sole reason for your post is to make someone else look stupid.
that absent transaction costs, no matter who you endow with the initial bargaining right, the person with the strongest preference will end up with that preference satisfied
That simply is not true in cases like the one posited which involve non-economic transactions. Indeed, citing Coase's Theorem for non-economic transactions seems silly, not incorrect, jut silly.
In any case, in many spheres of human interaction, I and others may not have a particularly strong preference for or against any activity, saying playing load music at the beach, but we have an implacable opposition to someone else tellng us what we may do. Or even trying to bargain with us about what they might offer us to get us to do/not do the particular activity of interest to the other person. So if I'm playing music loud at the beach, and someone makes all types of various offers to me to lower my music, I may simply tell the person to f.o. because I'm at the beach and he/she is intruding on my space. What about the fact that my space and his/her space overlap? All I'm concerned about is my space. So the other person punches me in the nose and throws my radio into the water. Loud music problem solved.
Or to make the example simpler, I am poor and have teenage daughters and have an enormous aversion to my neighbor playing loud foul misogynist, which is interepersed with jazz, opera, classical, rock and easy listening. In other words, my neighbor likes lots of music and doesn't have an especially strong preference for misogyny. However, it so happens that my neighbor is much wealthier than I am, so can afford to ignore the pittance that I can offer as part of a financial transaction. So no "transaction" occurs despite my preference being much stronger.
These types of interactions aren't that rare. It doesn't make a lot of sense to criticize Kathy G. for ostensibly critcizing you for using Coase's Theorem in a real world situation, and then make up a "real world" situation that elides a considerable amount of real world complications.
And in the examples I used above, you could say that it is further proof that whoever has the strongest preference wins (maybe more accurately, the strongest preference will dominate). Thgere certainly is room in them for this interpretation, but then the entire argument becomes pretty close to a tautology, sort of like saying that observed prices are correct because markets are efficient. One can't say that it's logically incorrect, it's simply not useful.
It is true that if you assume a can opener, you can then hypothesize a method of opening any can.
On the other hand, we understood you to be making an actual policy proposal to your non-liberertarian friend, not just making an interesting theoretical point.
If you were just brainstorming, then the question of what to do about noisy neighbors can become much more interesting. I suggest calling him up and trying these.
1) I would say there's no reason for the state to impose restrictions on noisy apartments, because maybe all the neighbors are deaf.
2) I would say there's no reason for the state to impose restrictions on noisy apartments, because maybe all of the neighbors are Marvel superheros like Dazzler or Vibraxas, who become more powerful when exposed to loud noises.
p.s.: This came across as a little more caustic than I really intended. I apologize, but can't think of a better way to say it. I should also say that I read and comment on your blog because you have interesting ideas, and this is the way I would talk to a smart friend who came up with a similar response.
p.p.s.: I should have read Kathy G's post before commenting on yours.
I still think the Coase Theorem is of limited value in your original discussion, for the reasons stated above and in the comments to the original post, but I agree that Kathy G is incoherent.
I am confused as to why libertarians bring up the Coase theorem in most contexts. The Coase theorem as I understand says that, if there is a situation where party A would prefer one state of affairs, while party B would prefer another, and the two parties are free to make payments to each other, than the party with the stronger desire will win out. Changing the default state may change the size of the payments, but not the final state.
Well and good. And I can see applications of this. For example, if we want to reduce air pollution for the benefit of future generations, it will not work to make polluters purchase the right to pollute from their neighbors. If the neighbors cared about pollution enough to set their prices high enough, then they would already be bribing the polluters to stop. Such a law would benefit the neighbors, but it would not reduce pollution.
But in the context of noise abatement laws, noise isn't some absolute evil that the government wants to eliminate. Noise abatement laws recognize that loud music is harmful to neighbors and that they deserve compensation. It is precisely the question of who will get the payment that matters, not the absolute level of noise. Saying that Coase's theorem proves these laws are irrelevant is saying that there is no moral difference between me paying you for inconveniencing you and you paying me protection money not to be inconvenienced.
You really should take a moment to proofread before posting, especially when the sole reason for your post is to make someone else look stupid.
What fun would that be? We need more drunken 3AM blog posts from Megan!! ;-)
What fun would that be? We need more drunken 3AM blog posts from Megan!! ;-)
Grogblogging? Blitzedblogging? There should be some quirky little title for the activity.
As much as I enjoy the dissipated image, I'm afraid that I was out dancing, not drinking, and the reason that this was written at 3:30 is that I'm a chronic insomniac.
Dave, this was the very point of the original post. I was talking to someone who was arguing that there was no such thing as a normative moral position, but who clearly felt very strongly that there was only one "just" default in this situation, that of a right not to hear noise. If *all* you are interested is maximizing the satisfaction of the strongest preferences in society, then in the absence of significant transaction costs, Coasean bargaining works just fine.
As much as I enjoy the dissipated image, I'm afraid that I was out dancing, not drinking, and the reason that this was written at 3:30 is that I'm a chronic insomniac.
That doesn't get us any closer to a new buzzword. And for the last time, stay away from the Jefferson Monument after midnight.
Also, one shouldn't be awake at 3:30am AND 9:30am.
Aaron
Try 4:30 AM and 8:30 AM . . . :)
Megan, I think you need to let go of the hate. I know it's hard when the hate comes to you but there will be lots of Kathy Gs, and lots more who make an issue of your womanhood. I enjoy reading your blog and until recently I didn't give your gender any thought, nor did I pay any attention to the gripes in the comments. Your recipes are delicious, your understanding of economics far exceeds that of your average commenter, and politics is a perfectly fine area for discussion.
Please keep the site positive, it doesn't do any good to taunt Kathy, or to rant about male chauvinist, and it comes off a little (not sure what the right word is) to complain about your admires.
.
spencer, is it your belief that common spelling/gramatical errors are a bigger indication of stupidity than logic errors? IMHO, they seem more like an indicator of not caring about minutia and focusing on the bigger point. Which is something that I value.
Is there some reason I should change that opinion?
Megan I started reading the G Spot for a while after Matt's recommendation but fairly quickly gave up on it. What I thought were some unwarranted catty comments directed at you in the monopsony post put me off, and I could see no compensation in writing or content.
As much as there is some entertainment value, if I were you I wouldn't rise to the bate.
I can't but feel that as much as you suspected that your gender had something to do with aggressive treatment from males that it may equally be a factor here.
The way I heard it told was that it was non-initiation of _coercion_.
But isn't this what most people believe anyway? I think that what has happened here is that the machinery has shifted into what constitutes 'coercion' or 'initiation of force'.
My neighbor blasting his amp at 11 at 3 a.m. and demanding that I pay him money to stop?
That's coercion.
spencer, is it your belief that common spelling/gramatical errors are a bigger indication of stupidity than logic errors?
Not at all. Everyone makes mistakes like that. However, it is my belief that anyone who holds herself out as a professional writer of any sort should take a bit more care in her craft - this sort of mistake appears in her work with alarming regularity. Also, it is my strong belief that Megan would benefit immensely from an editor, since this person would presumably 1) catch all of Megan's typos and laziness-related language errors, and 2) reign in her flagrant abuse of The Atlantic's worn and tattered thesaurus.
But I am pleased to see that she made the necessary correction.
And to prove my own point, I just now spotted at least two errors in my own comment above.
But then, I don't have a high-profile gig writing for The Atlantic.
reign in her flagrant abuse of The Atlantic's worn and tattered thesaurus.
Heh -- isn't there an internet law of some sort specifying the high probability that a spelling-flame comment will itself contain a spelling error?
Megan, you should illustrate this with an Edgeworth box because then your readers would get it.
I thought about trying to figure out what this post was supposed to be about. Then I decided not to when it became apparent that it was just inter-blogger bickering.
liberalrob, I highly recommend that you figure out what the Coase theorem is about, because it offers some useful insights into the kind of policy dictates you are likely to care about.
This post probably isn't the place to start, though.
Grogblogging? Blitzedblogging? There should be some quirky little title for the activity.
How about a Hammered Hammering? A Toasted Toasting? A...well, you get the idea.
At any rate, I have learned a valuable lesson from Kathy G. If I complain long enough, I will be able to get the positions of the Mouse Party fairly represented on this website. I'll bet I squeak louder than she does, too. Let the persuasion begin!
Your first link is incorrect--it just goes to a post in which she whines about you not linking to some earlier display of cluelessness on her part.
[Luckily, the person I was talking to was not among those who failed to understand what "preference maximization" meant]
Well, here's another hand raised. It's gibberish.
Also gibberish:
[the idea is that absent transaction costs, no matter who you endow with the initial bargaining right, the person with the strongest preference will end up with that preference satisfied]
that's certainly not what the Coase Theorem says and can easily be disproved with a very simple corner-case example - if you endow Vladimir with the right to play his violin and Estragnon with no money, then no matter how strong Estragnon's preference for not listening to violin music is, the outcome of Coasian negotiation will be that Vladimir can play his violin as much as he likes because Estragnon has nothing to bargain with. (All for me and none for you is always a Pareto-efficient outcome, because we can't make you better off without taking some from me).
DSquared:
As you acknowledge, that's a corner case. And since few suburban homeowners lack the means for this kind of transaction, it's not one relevant to the scenario in question.
Anyway, isn't the whole point of Coase that we should assign property rights in a way that minimizes transaction costs, rather than according to our moral intuitions?
4:30-8:30?
Got you beat.
True, I was in bed by 4:10, and probably asleep before 4:30. But I got up at 7:00.
And since few suburban homeowners lack the means for this kind of transaction
Hey, Brandon, hadn't you heard?
We're all subprime now.
Wow, this post encapsulates just about all of Megan crappiness as a blogger.
Some of you complain that I only throw flames, so for a full take down please visit:
http://firemeganmcardle.blogspot.com/2008/04/cat-fight.html
Dissention is welcome!
Anyway, isn't the whole point of Coase that we should assign property rights in a way that minimizes transaction costs, rather than according to our moral intuitions?
No. Coase's point was that it's possible, in certain circumstances, for well-defined property rights to stop externalities from distorting otherwise-efficient outcomes.
Coase's theorem does not have a "should" in it. That's Kathy G's point. And that's why Megan's post is gibberish when addressing preferences. An entire community, except for one person, could prefer no noise, but
1. if that one person has a defined property right to make noise; and
2. the rest of the community lacks the resources to reflect their preferences,
end of ballgame.
Brandon, I think Dsquared's point is that the concept of "strongest preference" (or, more generally, "stronger preference") is not well defined in this context. You have to specify some way that strength of preferences can be compared across individuals. In this context, it seems ultimately to be defined by how much a person is willing to pay, which depends on endowment as well as preferences. Thus so-called "strength of preferences" is not really a characteristic of preferences as such. This point becomes obvious in the corner solution case, but it is valid more generally.
You really hate women, don't you Megan?
After all, you disagreed with one.
L2P:
I know what the Coase theorem is. But it's my understanding that the point Coase was trying to make more generally is that every tort has two sides, and that, given non-zero transaction costs, it makes sense to try to assign property rights in a manner somewhat consistent with the end result of Coasean bargaining rather than in a manner consistent with our moral intuitions.
I'll bet this stings:
http://thegspot.typepad.com/blog/2008/04/coase-again.html#more
KNZN, I agree with you generally--the Coase Theorem is not the cure-all that many libertarians think it is. In this case, however, the conversation involved two people of similar endowments living next to each other in similar houses. I didn't specify all the conditions, because this would have taken a lot of time to explain something that was completely irrelevant to the original post, which revolved around distributive justice, not the application of the Coase Theorem to real-world events.
Megan - Your link to Kathy G's post or comments, doesn't work.
Fixed, I think