F. E. Guerra-Pujol (Pontifical Catholic University of Puerto Rico) has posted Coase's Parable (Mercer Law Review Forthcoming) on SSRN. Here is the abstract:
Some stories have heroes and villains. Others involve a voyage, a quest, or a monster to be defeated. The law is no exception. Broadly speaking, most legal stories are generally about identifying wrongdoers and vindicating the rights of victims, but what if harms are “reciprocal” or jointly-caused? In other words, what if victims are just as responsible as wrongdoers for their plight? It was Ronald Coase who first proposed this novel counter-narrative to the standard victim-wrongdoer narrative in law. Researching and writing in the late 1950s and early 1960s, Professor Coase–an obscure, middle-aged English economist at the time–plucked a number of leading cases from the English Law Reports and other sources. Coase then used these old cases to create a compelling but controversial legal counter-narrative: compelling because Coase’s parable forever changed the way many economists, lawyers, and judges see the law; controversial because it was Coase who first conceived of harms as a “reciprocal” problem. Simply put, whenever one party accuses another party of harming them, it is almost always the case that both parties are responsible for the harm–that is the essence of Coase’s novel and unorthodox parable.
And from the paper:
In summary, “The Problem of Social Cost” surveys a wide variety of harms, such as cattle trespass,71 noise and vibrations,72 railway sparks,73 and smoking chimneys,74 just to mention a few such harms. In all, Coase’s social cost paper features over a dozen “actual cases” and “classroom examples” of the problem of harmful effects.75 These multifarious cases all share a common thread: a business firm is engaged in a lawful activity, but that activity produces “harmful effects” on third parties.76 Coase then used these examples to create a compelling but controversial narrative: harms are always jointly produced; harms are a reciprocal problem.
Highly recommended.