Coase Theorem and Intersubjectivities

On the portfolio section of my webpage, I uploaded a video describing Ronald Coase’s contribution to externality research. Coase Theorem can be related to both economics and anthropology – by thinking at the margin as well as thinking holistically. The idea is that in certain conditions negative externalities can be internalized by market forces and paid for appropriately by society.

One consequence of the Coase theorem is that private property rights may be distributed arbitrarily in the beginning, so long as transactional costs do not exceed rents and private property is well-defined and distributable.

A couple of caveats must be considered before I develop my argument. First, transactional costs typically exceed rents – this includes contracts, lawyers, and diffuse cultural values. Second, the parties may not have sufficient information about the intentions of the other. Game theorists and economists have formalized some of these concerns.

To relate this to anthropology, I turn to this well-argued piece by Hannah Appel in this years open-access journal, Cultural Anthropology. Appel argues that capitalist projects should be traced by ethnography not (solely) to deconstruct and complicate the messy surface of capitalist narratives, but to follow its productive endeavors – including economic formalization and its proliferation.

The special part, for me, is that she creates a system of two empirical poles. At one end, capitalism results in the “accumulation, dispossession, and retrenchment of intersubjective differences” while simultaneously, on the opposite end, capitalism harnesses complex and contingent processes for the projects’ own ends. If we take these simultaneous aspects of capitalism as an inductive reality then our Coase theorem model can gain explanatory power.

Because it is not always apparent what a “best use” of land or labor may be, intersubjective differences could be used to explore the relations that comprise how people actually use their land or their labor. Differences can be abstracted out of the social context in order to re-level a social form so that capitalist interests do not waste undue expenditure in discovering the best use. Indeed, Apell notes that it takes a “tremendous amount of work to produce tenuous and contested approximations” of qualities thought to be intrinsic to capitalism.

Coase Theorem can both incorporate the information through ethnographic formalization of the social relations of land and labor use, as well as predicting future outcomes, i.e. what are the monetary consequences of a policy comprised of certain social forms?

There is a better way to root out productive and representative counterfactual possibilities, by letting anthropology and economics work together.


References and further reading:

Posted in Ethnography, Theory.