The Sense in Coase's Critique of Pigou : The Ceteris Paribus Case for Intervention

Campbell, Ian David (2017) The Sense in Coase's Critique of Pigou : The Ceteris Paribus Case for Intervention. Journal of Law, Economics and Policy, 13 (1). pp. 39-54. ISSN 1553-4367

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Abstract

One of the most important contributions to the rethinking of our approach to regulation since the 1970s has been Ronald Coase’s critique of the welfare economics of intervention formulated by AC Pigou. Seeking to continue the revision of our evaluation of Coase’s critique, the leading historians of economic thought Roger Backhouse and Steven Medema have made an important contribution to regulatory theory by arguing that Coase did not give due credit to Pigou’s conception of the ‘prima facie case’ for intervention. This paper argues that Backhouse and Medema themselves give too much credit to what is substantially a rhetorical gesture which I have previously called ‘ceteris paribus reasoning’. Those conscious of the legal difficulties of regulatory design who seek to justify intervention, and indeed the welfare state, must now give more weight to Coase’s criticism.