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The problem of social cost: the role of the state

Max Gillman (Department of Economics, Central European University, Budapest, Hungary)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 1 May 1999



This essay presents a theory of the State as derived from the writings of Coase, Stigler, and Smith. It argues that the state may find a role in (1) lowering the level of transactions costs; and (2) redistributing property rights given the level of non‐zero transactions costs. These tenets suggest an explanation for the secular growth of government. Also, alternative to the Marshallian theory of differing marginal utilities of a dollar of income, the essay offers a more general theory of redistribution in a way consistent with Coase’s (1992) concept of a transactions‐cost‐based, more general, price theory.



Gillman, M. (1999), "The problem of social cost: the role of the state", International Journal of Social Economics, Vol. 26 No. 5, pp. 590-596.




Copyright © 1999, MCB UP Limited

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