Economists Warn: Misunderstanding Coase Theorem Harms Critical Thinking on Externalities
The article examines how textbooks teach Coase's ideas on fixing negative external effects. Most textbooks link Coase's ideas to Stigler's Coase Theorem, but Coase's original work has a different approach. By studying old writings, the authors show that there are two main ways to deal with negative effects: one following Pigou, Stigler, and Samuelson, and the other following Coase. They looked at 45 economics books and found that many don't present Coase's views accurately. A Coasean approach challenges students to think critically rather than just promoting minimal interference or intervention.