Arthur C.Pigou and Ronald H.Coase:A Comparative Study of Regulation Theories

The regulation theories of Arthur C.Pigou and Ronald H.Coase are in direct conflict.Pigou argues that marginal private net product does not equal marginal private net product for some goods owing to externality.Therefore,governments should interfere and levy a Pigovian tax.In contrast,Coase holds that unclear property rights are the fundamental reason for externality and proposes the Coase theorem that well-defined property rights could overcome the problems of externalities.Coase has expanded the theory of externality regulation on the basis of Pigou,but the Coase theorem cannot surpass and substitute the Pigovian tax.