The Coase Theorem and the Psychology of Common-Law Thought

The Coase Theorem is a simple proposition-in the absence of transaction costs, a Pareto optimal result will occur regardless of the initial placement of legal liability. Despite this apparent simplicity, however, Coase's economic parable has provoked intense debate in the legal community. Why does the theorem grate on the hardened intuitions of so many lawyers? The thesis of this Article is that a connection exists between the adoption or rejection of a given school of legal thought and the use of certain psychological constructs. Specifically, this Article argues that the constructs underlying the Coase Theorem are incompatible with those underlying common-law thought, and that the uneasiness that lawyers have about the Coase Theorem reflects this incompatibility.