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Article Review – Information and the Coase Theorem
What is Coase's central claim? Coase challenges the belief that competitive markets are required for efficiency, claiming that when markets produce inefficiency, people will negotiate until a more efficient outcome is achieved (113).
What does Farrell suggest regarding the benefits of government intervention? To critics of government intervention, Farrell states that laissez-faire economics can only claim to be 'no less' efficient than centralized control under ideal circumstances (116). He compliments this statement by observing that, efficiency aside, governments are better at addressing inequity across society than the free market (116). It's also noted that central authority may be better at securing the interest of unwilling individuals in schemes which yield public benefits (121).
What is Mechanism Design all about? Mechanism Design concerns the approaches which governments take to secure information from people regarding their economic motives (117). Acquiring such information reduces individuals' potential to gain unfair advantage through unequal distribution of knowledge (118). The art of mechanism design is in obtaining desired intelligence without the source realising how it will be used (118). When does a centralized decision maker make the most sense? Centralized influence is useful in establishing a fair…
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