What Is There in Common between Arab Revolutions and the Coase Theorem?

Gennady Bilych


Great achievements are rarely accompanied by quick success. This is because revolutionary ideas normally involve a wider range of problems than at first thought. After a period of fair and unfair criticism there follows a period of sober and fruitful discussion. Only after this comes the time of practical application and final development of the new idea. The Coase Theorem is now at its final stage of development. This is confirmed by the recent emergence of studies that I believe to be very promising involving qualitative measurements of transaction costs of exchange and the history of their changes over the centuries. In some of the studies, the view is expressed that the form of ownership of production facilities depends on the amount of transaction costs. With that said we are only one step away from the important conclusion that with a sufficiently high level of transaction costs and a low level of labor productivity, private ownership is not possible and a firm must be very large and may occupy the entire area of a state. This may be the reason why there were powerful centralized economies run by a czar, a king, a feudal lord or a pharaoh. The complex irrigation systems of the Nile required constant joint efforts of tens and hundreds of thousands of people under the central leadership and control of a supreme ruler. This was the only way to achieve a maximum level of production and an acceptable standard of living and have protection from foreign enemies in those times. This and other conclusions, which I hope deserve a certain amount of attention, form the basis of this essay.


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DOI: https://doi.org/10.5296/ber.v3i1.3094


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