Minimal Liberties, Maximal State and the Market: The Case for a Coasian Liberal

Abstract

The paper compares the Sen's paradox on the Paretian liberal (1970) and the standard version of the Coase theorem (1960). The comparison of the two theorems is somehow puzzling: If we accept Sen then we have to forget Coase and vice-versa. Following the analysis of Hillinger and Lapham (1971), Nozick (1974) and Gibbard (1974), among others, the paper first shows a possibility result for a Paretian Liberal by applying the Coase Theorem in its hard version and then shows an impossibility result for a Coasian liberal by applying the Sen Theorem. What generates a possibility result for a Paretian Liberal shows also the conditions for an impossibility result for a Coasian Liberal unless any hierarchy of social preferences is introduced by any allocation of rights in order to induce social preferences to follow rights. This conclusion leads us to show the relevance of ex-ante (alienable) rights definition for a Coasian market to work and the necessity of a maximal state (which properly defines an alienable right for every relevant state of the world) - instead of the Nozick's minimal state - to enforce minimal liberty when agents fail to properly define a complete (alienable) rights allocation over the social choice domain.