Economists are interested in what economists call externalities, where my actions either to harm your or help you. And why is it in those situations some legal structures make more sense than others? So let's talk about some of those examples andand what comes into play with transaction cost when he was trying to explainYeh i i well qout the most famous example is te the the rancher and the the farmer. You have railroads going through a field. That's a socially useful activity. But railroads throw off sparks, and sparks always run a risk of igniting crops growing near by. The railroad imposes a cost on the farmer. We we need a way to to deal with
Don Boudreaux of George Mason University and Cafe Hayek talks with EconTalk host Russ Roberts about the intellectual legacy of Ronald Coase. The conversation centers on Coase's four most important academic articles. Most of the discussion is on two of those articles, "The Nature of the Firm," which continues to influence how economists think of firms and transaction costs, and "The Problem of Social Cost," Coase's pathbreaking work on externalities.