In the study of law and economics, the Coase Theorem posits
that an efficient allocation of resources will result when transactions
costs are zero.1 These “transaction costs” may be viewed as impediments
to an efficient allocation of resources and can take many forms. For
example, long distances between a prospective vendor and purchaser of
property and a lack of communication facilities between them would
impede even the best of intentions to enter into a bargain. Similarly,
the cost of mobilising labour and materials might impede a property
developer from pursuing a tender for civil works. In some cases, a high
rate of Stamp Duty on transactions can result in the parties
reconsidering their decision to enter into such bargains. To the extent
this author can claim knowledge of economics, the Coase Theorem also
suggests that transaction costs and inefficiencies hamper the natural
flow of bargains, result in inefficient allocation of resources and thus
impact the economy. Some transaction costs are small enough to ignore
whereas some, imposed, for example, by the law, are unavoidable. In such
cases, a mutual understanding between the parties may see the burden of
these transaction costs shared or, in others, avoided altogether. For
example, the statutory requirements that all leases purporting to grant
a term in excess of one year or which reserve an annual rent must be
registered and stamped2 often results, in owners of residential property
granting indefinitely renewable leases of 11 months and thus avoiding
such requirements.
Radio Regulation Revisited: Coase, the FCC, and the Public Interest