Coase Theorem fails to account for long-term uncertainty, undermining dynamic efficiency in negative externality scenarios.
The article discusses a limitation of the Coase Theorem when dealing with negative side effects. It challenges the idea that giving property rights to parties who can use them best solves the problem. The researchers argue that this solution, based on changing ownership, might not work well over time when the economy is looked at in a dynamic way. As more time passes and more people are involved, things become uncertain and the overall efficiency drops. The study highlights that the economy isn't just a series of separate moments but a continuous process where changes can impact outcomes.