Ping Chen:Coase Fantasy of Zero Transaction Costs And Asymmetric Bargaining in Social Conflicts

Abstract:Coase constructed a fantasy world with zero transaction costs.Implicitly, he proposes three hypothesis in his market solution of social conflicts: transaction costs are measurable in cost and benefit analysis of economic institution; optimal institution can be achieved without government regulation since transaction costs are driven down by market competition; social conflicts can be solved by bilateral bargaining when transaction costs are insignificant. His central argument is symmetry between demand and supply or symmetry between consumption and investment in equilibrium perspective. Coase approach is contrary to the laws of physics and historical trends in division of labor. Symmetry breaking is an essential feature for origin of division of labor and root of social conflicts. Sustainable market can be maintained by asymmetric compensation in protecting disadvantaged groups and innovative forces.

Key Words: transaction costs, Coase Theorem, symmetry principle, symmetry breaking, and asymmetric compensation.

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