Is Harm of a Reciprocal Nature? The Outcome-oriented Equilibrium Thought Behind the Coasian Thesis

0:00It's really honored that I could present my paper here. This is actually my first time that I can attend such a conference. Not only so, this is also the first time that I came to the U.S. It's such an exciting experience. And I've already learned a lot about what is the American culture and the American spirit. Yeah, it's really exciting. So, my English is not so good as I just said the first time, all this first time. So, maybe I would sometimes run to rescue, somebody maybe help me to translate sometimes, sort of that. Okay, let's come to my topic today. It's about rural radical cause.

0:49I feel, when I hear, I really feel good because those presenters have talked about subjectivism, and Socialist Calculation Debate, I expect that I could enjoy to talk with the people here because there are so many sympathetic listeners here, I think. Now, my topic is the home of a reciprocal nature. Everybody knows that Coase wrote a paper in the 1960s that such a paper is arguably the most famous paper in the last century and also the most cited paper.

1:40In his paper, he proposed such a statement that The problem who haunts whom is of a reciprocal nature, and I think such a statement influenced much many, many people, especially in the field of law and economics, and many people feel instinctively that the reciprocal, I call it reciprocal thesis, of course. Most people feel such a thesis is unacceptable, maybe for some Austrians it is somehow feel instinctively immoral. I feel so, and as far as I know that some Austrian scholars have made a contribution on this, in this respect, for example, Walter Block, Gary Loss, has tried to reveal what's The absurdity behind cost reciprocal thesis since 1970s, but it seems that they feel their assertion, they argue against cost such reciprocal thesis, they argue against, but they feel their claim did not get enough attention.

3:07I wish I could push a little bit forward based on their work somehow. First, I'd like to talk about the essence of such doing, I mean, the three definitions of the problem. The problem, conventionally, who harms whom is the problem about, what is this, causality, responsibility problem. But by cost redefinition of it, it becomes a problem of a typical new classic economics problem. I call it resource allocation problem in new classic economics. Please pay attention that I get the new classic emphasized because I do not argue against resource allocation problem per se.

3:58If it is defined in the Hayek's sense, but as many people here would understand me that resource allocation problem in new classic economics is what we Austrians sometimes feel instinctively what there is some problem with it. So, Coase's redefinition of the problem, the literal problem, from the start, make his paper get trapped in new classic economics. And if people do not argue against this, you would find that a serious argument of Coase would follow. So we could not argue against any of those conclusions derived from such premise.

4:45So for me, the first question we need to ask is, is cost definition, redefinition of the lateral problem justifiable? This is very critical, I think, especially for Austrian economists. My main argument is that cost approach is basically very new classic. With the definition of the problem as a typical resource allocation problem, this is what he has been doing from the start of his 1960 paper. And I want to substantiate my argument that the white-cost approach is essentially no different from the resource allocation approach in nuclear economics.

5:34I gave out evidences from four aspects. First, evidence. New classic economists treat different people's conflicting interests as that of one person. This is for Austrian economists to feel instinctively wrong. For example, in his paper he said that the latter of the choice is clear, meat or crops, and later he says that he makes a comparison of different people's loss and gains. This is a very new classic, especially for those trained in Carnegie, for example, who have read the textbook, a new classic textbook.

6:28In most new classic textbooks, students are taught that the problem facing a society is that of choosing more butter or more bread. So, if you make such a comparison, you feel really the same. This is what Coase said. Evidence two, seeing the coordination problem around of different people's conflicting interests as about maximizing something. On this point, I think Buchanan has made outstanding contribution. He has emphasized again and again that the society is not about maximizing anything.

7:19But Coase, this is my quotation directly from what he has said, he explicitly defines the problem as that of maximization. Of course, his definition make many people feel very scientific.

7:47Evidence three, and this evidence from this aspect, I think many people haven't noticed. I feel it's curious. I cannot understand why. Coase talked about the problem in reference to a crucial word, what I mean, these quotations from Coase, it's all absurd, very, I think it's nonsense, all this is nonsense, but people accepted it. For example, he told that there would be low crop damage without crops. Then he told low smoke lucence without fires. Again, he said that if there is no doctor's work, then there would be no confectioners' home.

8:36So all these nonsense, but people let it go for so many years, I feel it's very acceptable. And also said that both parties cause damage. The essence of such cause argument is that, in my word, it is that when people, some people are involuntarily involved in a relationship with others, he is the victim, but in cause word, he would say, why are you there? If you were not in the vicinity of my activity, there would be no such home.

9:25He is simply blaming the fact that we are not living in a crucial world. And this is not the fault of anybody, but both parties. It's very ridiculous, but our profession has let it exist in our literature for so long time and nobody criticizes it. But I feel it's really no good.

9:52Evidence four, Coase talk about that no compensation would not necessarily undesirable. I think many people still remember this. He talk about the engine, the train engine, There is a fire and his argument against Pigou is that because Pigou has the thinking that the compensation is necessary, Pigou is instinctively influenced by the traditional causality responsibility idea and Coase would think that Pico hasn't seen his position through.

10:45So in Coase's idea, what matters is we choose two different situations. If one situation could produce higher value of production, it's better. So his argument is from the end result, end state of equilibrium, from the initial state. But I was from China, I was instinctively felt repulsed by such kind of argument. Maybe some people here have some idea of what's going on in China, they say China's GDP is going fast, but there are disparities in wealth, how does that happen? Because our government sometimes would say, you should sacrifice your interest, because if you do so, we could get bigger pie. So we feel it's nonsense, but in Coase's paper, it is argued exactly Let me rehearse some of the resource allocation problems in nuclear psycho-economics.

12:13Because actually, on the surface, the target of my criticism is COAS, but my ultimate target of criticism is New Classic Economics. I think COAS is simply applying the approach in New Classic Economics. So I've got to speak a few words about the resource allocation problem in New Classic In New Classic Economics, it is a personified society, which means the policymaker who as a surrogate makes the ultimate choice to say whether it was worthwhile to give up more meat for crops, something like that.

13:02I emphasize that the word ultimate choice is why I do so. It is because many people do not feel there is any wrong with the resource allocation approach in new classical economics, because in new classical economics people will feel it is referred to decentralized economy. In general equilibrium theory, it is explicitly said that it is about decentralized economy, In the end, because new classical economists unconsciously endorse the idea that we could know the end equilibrium state, then it is ultimately the person who knows the end state of equilibrium who decides that free exchange between people is allowed or not.

14:03So this is the reason why I emphasize ultimate choice, especially in terms of Coase. Many people are misled into thinking that Coase is a free marketeer, but I think because Coase compared to Pico, he really emphasized free exchange to get problems resolved. But just like his New Classical predecessor, Coase also felt it is another person who has not said about if such voluntary exchange between person can lead to efficiency or not.

14:49So it's very, very, I think it's subtle, there is some subtlety with such argument. This is the reason why I will emphasize it is not a personified society who makes the ultimate choice.

15:09The economic problem of a society in the Hayek sense also coordinating among different purpose persons is understood as about rational calculation from the perspective of some given subject, or this equivalent, because it is a rational subject who is to decide for the society. Just three minutes, okay. And then another point is that the outcome, the reason I, my, the title of my paper is so long is that I emphasize the outcome centered because there in course and as in many new classic economist, they would think that the equilibrium outcome is low and it's empty.

16:02So people would, according to such law, to decide how to allocate the initial assignment of property rights. So the essence of the resource allocation problem in new classic economics is that reducing the coordination problem arising in the context of different purpose to people, to crucial rational calculation problems. So this is right. I always appreciate people here talking about socialist calculation debate. I think that cause should also learn from all this. But also I mean that if we do not say through what is cause advocate, this is our problem.

16:56Okay, maybe I just stop here. I have another longer version. If some people feel not convinced by my argument, maybe we could talk later, because I also argued somehow sympathetically in the course side. So, I just, okay.