Pigouvian vs. Coasian approach: Ideas, values, perspectives

Abstract

The paper reveals the characteristics of competing approaches — Pigouvian and Coasian — to identify the grounds for state regulation. We outline the connections between Pigouvian and Coasian approaches with the values and prospects for their advancement in the field of political decision-making in the context of demand for economic knowledge and the possibilities of organizing compensating transactions. These connections are considered in the light of the externalities problem as one of the manifestations of market failure, as well as different internalization options. We also clarify the provisions from the theory of externalities in terms of their definition, classification and correlation with the conditions for optimal allocation of resources. The key types of structural alternatives for correcting market flaws are considered, and the main properties of the Pigouvian and Coasian approaches in economics, as they relate to the problem of market and government flaws, are determined. This helps explain why the Coasian approach cannot be considered synonymous with liberal fundamentalism. Finally, we indicate the relationship between normative conclusions and prospects of functionalism and two types of fundamentalism in the field of political decision-making. Using the example of intertemporal externalities, the difference in the approaches of Coasianism and Pigouvianism to their internalization is demonstrated.