Campbell and Klaes, ‘What Did Ronald Coase Know about the Law of Tort?’

In 1996, Brian Simpson criticised the legal competence of the discussion of the 19th century land law case of Sturges v Bridgman in Ronald Coase’s ‘The Problem of Social Cost’, and Coase responded to these criticisms. The discussion of Sturges v Bridgman was central to Coase’s law and economics, and Simpson’s aim in showing it to be unacceptable as legal scholarship was to reveal fundamental ethical and theoretical shortcomings in Coase’s general approach. In revisiting this neglected debate, our aim is not so much to shed new light on the debate itself but to draw fresh insight from that debate in order to address current issues in economics and in law. Without denying Simpson’s criticism of Coase’s legal scholarship, we will show that the approach Simpson criticised was, indeed, one Coase himself rejected. By explaining how Coase came to treat Sturges v Bridgman in the way he did, we will seek to develop key aspects, not only of Simpson’s criticism, but of Coase’s response, and of the original arguments in ‘The Problem of Social Cost’ to which both refer. Though Coase’s attempt to draw on legal materials in ‘The Problem of Social Cost’ was highly commendable in its intent, the roles played by Sturges v Bridgman in particular — and by the positive law of private nuisance in law and economics generally — are difficult ones which have generated a great deal of misunderstanding of Coase’s theoretical argument. Paradoxically, it turns out that Coase’s analysis of nuisance cases leads to there being too much ‘state’ and not nearly enough ‘voluntary exchange’ in his seminal article. We argue that this contributed to an excessive emphasis on Posnerian wealth maximisation in subsequent law and economics, and therefore to an inadequate appreciation of the possibilities of exchange in economic and legal policy.

Campbell, David and Klaes, Matthias, ‘What Did Ronald Coase Know about the Law of Tort?’ (2016) 39(3) Melbourne University Law Review 793.

First posted 2016-07-08 06:19:40

Leave a Reply