Piguvianism vs. Coasianism: Who Wins?

Abstract

The main characteristics of approaches to the discussion of the sufficiency of grounds for the introduction / cancellation of state regulation due to the identification of failures in the price mechanism are revealed. The comparison of approaches is presented on the basis of the problem of externalities. In this regard, the provisions from the theory of externalities have been clarified in terms of their definition and correlation with the conditions for optimal allocation of resources, and certain types of external effects are presented. The key types of correction of price mechanism failures are considered, including regulatory intervention, setting up the price mechanism (including the creation of missing markets), maintaining the status quo with externalities. On this basis, the main properties of the Pigouvian and Coasian approaches in economics are determined in relation to the problems of this form of market failure. The features of Coasianism as a functionalist approach to research in contrast to fundamental liberalism are revealed. Taking into account the importance of values, the opportunities for designing of compensatory transactions and the supply and demand of economic knowledge, assessments of the prospects of functionalism and fundamentalisms are presented as a guide to action in the field of discussion and political decision-making. The comparative advantages of functionalism and fundamentalisms in the intellectual traditions of discussing the role of the state in the economy are shown.