Coase theorem

This alternative approach holds the potential to transform housing politics.

The bargaining failure theory of nimbyism is an application of the Coase theorem.

Proposed in Ronald Coase's 1960 paper, The Problem of Social Cost, the Coase theorem holds that when property rights are clear and there are no transaction costs in bargaining, the allocation of property rights does not affect economic efficiency.

If one party has the right to engage in an inefficient behavior, like blocking new housing, then the other can offer compensation to induce them to stop.

But bargaining is prone to fail when transaction costs are too high or property rights are unclear.

Local opposition to housing development happens because the assumptions of the Coase theorem fail to hold.

In land use policy, zoning operates as a kind of de facto and dysfunctional property right, and existing procedures involve high transaction costs.

In response to this bargaining failure, the preemption strategy seeks to transfer rights over development from local communities to higher levels of government.

How small can a company get?

So the whole point of Coasean economics is transaction costs determine the size of the firm.

And if transaction costs are high, that agitates in favor for a larger firm.

And if transaction costs are low, that agitates for a smaller firm.

So if transaction costs are going to zero, that agitates in favor of the size of the firm going to zero.

So if my reasoning is sound, do we think the size of the firm is going to be one person or less than a person? Because there's a countervailing force that one might perceive, which is, we talked earlier in this episode, which is frontier capabilities potentially getting walled off from the rest of the economy.

If OpenAI, for example, hypothetically, is using internal unreleased models to solve grand challenges in math and the rest of the economy doesn't yet have access to them, as a friend of mine, Rune, at OpenAI, others have pointed out, wouldn't that agitate in favor of the exact opposite Coasean economics of firms growing larger and larger so everyone has access to those internal capabilities within the frontier lab.

What happens when an irresistible force meets an immovable object or something? What happens when a Coasean large frontier lab with superhuman, super intelligent capabilities meets an agentic economy that wants to distribute transaction costs out to the edge and combined with Argentina wants to create non-human corporations? It's not obvious where that ends.

these soloprene- these solopreneurs are almost like, uh, you know, uh, we just have more and more independent contractors performing services that in the past, firms would have brought in-house because the costs were lower.

But that, you know, this is a very Coasean framework for, for, for how we think about it.

Like it could be that, um, uh, coordination costs have gotten so low, right, that firms can now just basically outsource a lot of different services that normally they would hire in for, and that these solopreneurs are filling that, that demand.

Um, it could be that these solopreneurs actually don't end up looking that much different in the medium to long run than they have in the past, and they hire people eventually.