The Great Oz Has Spoken

Steven Landsburg has the habit of speaking ex cathedra, or after the fashion of someone issuing a Papal Bull, or at any rate, some kind of bull. A typical example is his recent proclamation on Environmental Economics, e.g.:

A.C. Pigou taught us that we get better outcomes when decisionmakers bear the costs of their actions. Ronald Coase taught us that Pigou’s lesson cuts two ways. The shrimp boats that are sitting idle today are sitting idle partly because BP decided to drill in the gulf, but also partly because the shrimpers chose to operate in the vicinity of an oil rig. In this case, making BP feel the costs of its own decisions entails insulating the shrimpers from the costs of theirs.

Now it seems that some of his commenters are largely exercised by the horror of calling the corporation formerly known as British Petroleum by that name rather than its current alias, but others point out that Coase mentioned some limitations and conditions of what others have called "Coase's Theorem."

One of them is that property rights be clearly assigned and readily tradeable. Landsburg believes that the question of whom should bear the costs of the present externality is "a symmetric problem," and doubtless it is in the imaginary economic world he lives in, but in our world property rights are mainly with the shrimpers (and others affected), otherwise ambiguous, and most definitely untradeable. In other words, Coase's theorem says approximately as much about the case in question as the Pythagorean Theorem says about the price of tea in China.