"TheProblemofSocialCost"isaseminalessaywrittenbyeconomistRonaldCoasein1960.Itchallengestraditionalviewsonhowtoaddressexternalities—situationswhereoneparty'sactionsaffectanotherpartywithoutcompensation.Coasearguesthatundercertainconditions,privatenegotiationsbetweenaffectedpartiescanresolveexternalityissuesmoreefficientlythangovernmentintervention,providedtransactioncostsarelowandpropertyrightsareclearlydefined.ThisideabecameknownastheCoaseTheorem.Theessayhashadaprofoundinfluenceonlawandeconomics,particularlyintheanalysisofpropertyrights,liabilityrules,andtheroleofmarketsinsolvingsocialproblems.Itremainsafoundationaltextforunderstandinghoweconomicactorscaninternalizeexternalitiesthroughbargaining.
