Coase’s key insight is that all of these externality problems are fundamentally symmetric. The question is never “how do we stop A from harming B?” but instead “should we let A harm B, or should we let B harm A”? A consequence of that symmetry is that no abstract principle — including the abstract principles that guided Pigou and still guide Kolbert — can possibly be used to guide policy. Any purely abstract argument for preventing harm from A to B is an equally good argument for preventing harm from B to A.Coase is #2 on my list of 20th century economics geniuses who changed how everyone should think about the world...after Hayek.
Anyhow, RTWT.
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My first thought is that this seems to ignore Schelling's insight that games which seem to be isomorphic to perfectly symmetric mathematical abstractions only retain that isomorphism if you ignore "human" aspects of the problem. I tell you and a random partner you can't communicate with, "Look in this almanac's list of 455 cities with more than a million people in them, choose one, and I'll give you a million dollars if you both pick the same city" - do you think the odds of you succeeding are exactly 1-in-455, or more like 50%?
Likewise, ask two random people, "should people with thousand-year-old property only get to keep using it if they pay people with an incompatible hundred-year-old invention, or vice versa", do you think agreement will be exactly 50%, or more like 95%?
Coase also seems to ignore (fairly, since it was two decades later) Schelling's insights into threats and bargaining. We may be able get to a Pareto-optimal solution whether you have the right to be paid every time I bulldoze your house or whether I have the right to be paid every time I don't bulldoze it, but exactly *which* solution (and its total quality, especially for negative-sum games like "Roy rents a bulldozer and needs to demonstrate precommitment") strongly depends on which rights trump others.
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