In economic activity, there are sometimes ‘externalities’ or spillover effects to other people not involved in the original exchange.  Positive externalities result in beneficial outcomes for others, but negative externalities impose costs on others. Prof. Sean Mullholland at Stonehill College addresses a classic example of a negative externality, pollution, and describes three possible solutions for the problem: taxation, government regulation, and property rights. The first two options are difficult to monitor and may create perverse incentives.  A better solution to overcome the externality is property rights, as described by Ronald Coase. As long as property rights are well-defined, divisible, and defendable, parties can negotiate to reduce the impact of the pollution.


  1. jjustinwilson

    Externalites should be priced and sold in the market voluntarily.

  2. Matt Wavle

    Property rights is a great solution, provided that the state does not arbitrarily decided to infringe on those rights without notice.

  3. Chocolate Thunder

    It would be great if the next video on this topic talked more about transactions costs, as Coasean bargaining resulting in an efficient solution seemed to depend on transactions costs being low.

  4. taschrant

    That was totally awesome!  I wonder how badly the EPA is in respects to respecting property rights.

  5. Grady Flanagan

    Yes, the unfortunate truth of property rights is that they protect you against your neighbor dumping trash on your land or even a company, but if the government wants to invoke eminent domain, then damn your property rights

  6. Matt Wavle

    When property rights are infringed by others’ use of neighboring properties, then damages are due.  Merely holding people responsible for their actions will help insure that the value of one’s property will not be diminished significantly by the actions of a non-owner.

  7. kevinbuttrum

    true statement. Bravo

  8. Air Max 90 pas cher

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