FE486A: LAW AND ECONOMICS
Spring 2015
Professor Schmitt
Writing Homework 2 – due 21 Jan
This assignment should be approximately 1 typed page in length. After reading chapter
4, the article “Holdouts, Externalities, and the Single Owner: One More Salute to Ronald
Coase*” by Richard Epstein in Journal of Law and Economics, 1993, 36 553 – 586.
found on my website (http://www.usna.edu/Users/econ/pschmitt/FE486A/S2015
/readings.htm ), please write a commentary that addresses each of the following:
1) Why is it important that Coase modeled for zero transactions cost if they don’t
exists in the real world? Therefore, what is the role of law given positive
transaction costs?
2) What are the two impediments to property rights that Epstein argues may arise?
This is, what problems arise with weakly defined property rights and what
happens if property rights are too strict?
3) What problems, if any, can arise with property rights? Support your statements
with examples from the cave discussion in the article.