Abstract

In his classic paper on social costs, social scientist R. H. Coase has argued that in a world without transaction costs in the "buying and selling," of social benefits and damages, resource allocation would be unaffected by a change in the apportioning of liabilities. That is, whether or not a social nuisance-causer must pay damages to those to whom he is a nuisance, will not, in an efficient economy with no transaction costs, have any effect on resource allocation. In this paper, the author intends to show that there is a certain class of nuisances that are not amenable to Coasean solutions even if one grants Coase 's intuitive notions of prudence and rationality, it is considered these situations only in the short term, and considerations of equity are ignored. This class of nuisances comprises certain of those instances in which the interests of a tenant are not identical with those of his landlord. The article also purposes to shed light on the merits of an "unearned increment" tax on the value of land.