• Michael

    Moral statements seem to be protections for the status quo. Anytime there is some innovation which changes the property endowments of a group there would be a loss to that group undermining some ethic or moral. We can only posit moral neutrality from a fictitious disinterested vantage point. We also have to constrain ourselves from ever havng the choice to become interested. Otherwise we are making moral decesions at every step even if the change is spontaneous (unless we forgo property rights). Spontaneous change is often the signal for the drumbeat of moral argumentation. This is fundamentally a critique of the paretian-coasian system (consider Sen’s impossiblity theorem as an example of this problem).

  • conchis

    Wow. That paper really is astoundingly bad.

  • Try to think of examples where reducing transactions costs leads to a morally inferior result

    Legalizing contract killing?

  • Mark

    Nick Szabo had a great critique of the Coase theorem, http://unenumerated.blogspot.com/2008/05/coase-theorem-is-false-contracts-depend.html, which has made me really skeptical anytime I hear someone start a sentence with “according to the Coase theorem”.

  • This reminds me of the Cowen/Hanson paper (that I haven’t read) about whether disagreements are “honest”.

    http://hanson.gmu.edu/deceive.pdf

  • The paper equates transaction cost with information cost. No transaction costs means perfect information. You wouldn’t need to negotiate because you’d know everyone’s potential consumer surplus so trades would just happen.

    There seems to be an assumption in there that because you know someone else’s utility, you’d act to maximize it too. Not sure why that would be true. It seems to me that selfishness is more than ignorance of others’ preferences. Its a nice thought though.

    On that assumption, though, reducing information costs is equivalent to increasing empathy which I take to be a morally superior policy objective. At least that’s what Mom used to say.

    Conchis, does Tulane not sit high enough up on the pecking order or do you have substantive criticism of the paper? Its weird, but why “astoundingly bad”?

  • Matt

    I just read the article. The key point: in a world a zero transaction costs, information costs nothing to acquire, so there are no information costs, so you can know every single fact instantaneously.

    The point that ultimately means his argument fails: with zero transaction costs, it costs nothing to ignore the pain of others.

    Read the whole thing to understand why. It’s a simple read and amenable to skimming

  • JPC

    The point of the paper is not silly – the reductio ad absurdum exposition is. Reducing costs of information access and transfer should increase the ability to trade and also to form policy consensus. However, for whatever reason, the current state of informational costs seems to have had the opposite effect – increased ability to marshal facts to support partisan preconceptions. What is needed is the ability to form an ensemble of social and economic experiments and view and agree upon the outcomes. It’s possible that future computer models may be sophisticated enough to do this with widespread acceptance.