PROPERTY RIGHTS AND THE PROBLEM OF EXTERNALITIES

Year: 
2019

Article:

Issue: 
4

DOI: 
10.34076/2219-6838-2019-4-64-72
Author(s): 

Sergeev Andrei

Associate professor, Ural State Law University (Yekaterinburg), candidate of economic sciences, e-mail: asergeev@k66.ru

Author(s): 
Sergeev Andrei
Abstract: 

The article discusses the concept of externalities as one of the key categories of the economic analysis of property rights. Based on a number of scientific publications by R. Coase, the author analyzes his approach to solving the problem of externalities, i. e. conflicts of interest arising from negative externalities during the realization of property rights. The author considers the essence of the reciprocity principle, which expresses the bipartite nature of the negative externalities and is directed against the unilateral understanding of causality and the unambiguous identification of a causer of harm and a victim. The most common formulation of the Coase’s theorem is articulated. Its preconditions and main conclusions (about the effectiveness of the resources allocation and its independence from the original distribution of property rights) are revealed. The article shows that, according to Coase, when transaction cost is positive, the internalization of externalities provides for the use of economic efficiency as a key criterion for assessing legal provisions and judicial decisions. The author formulates conceptual requirements for the legal system in order to solve the problem of externalities and efficient use of resources. He concludes that law plays an active role in the economic sphere and it is mandatory to regulate the distribution of property rights for the internalization of externalities.

Key words: 

externalities, internalization of externalities, property rights, Coase’s theorem, transaction costs, efficiency

Text of the article: 
English