Does anyone here have a fairly good background in theoretical economics?

[lostinacause]

I need someone to take a second look at this to see if I made any critical judgment errors. Thanks for any help in advance.

Coase Theorem and Characterization of Gains From Trade

The Coase Theorem is a part of bargaining theory. It suggests that when there are gains from trade that can be realized, they will be realized so long as transaction costs are less then the gains. In developing policy this theory is important because, based on the how the transaction costs are characterized affects whether the outcome is socially optimal compared to another rights distribution or forced market manipulation.

An issue that I find problematic is that characterization of part of the transaction cost as benefits to society. The reason why this is argued is that the transaction costs go to the individual who is able to do the arrangements for the contract. This does not take into account the next best use for the individual’s resources. Unless the individual has no value to society doing something else ignoring the next best alternative could greatly overstate the value that the transaction adds to society.

Consider a potential trade where the gains to be realized from trade are “G”. Each individual has a time loss cost of “L”. A lawyer could draw up the contract for “C” but would earn a wage “WL=C”. His next best job to earn a wage doing another job “WO”. Each individual would split the gains.

Each individual would get half of the gains from trade
G1=G2= 1/2 (G-2L –C)

Lawyer would get “WO” if not working so the lawyers gains
GL = WL – WO

Net societal benefit is equal to the sum of the benefits of all of the individuals.
GS = G1 + G2 +GL
GS = 2 G1 + GL
GS = G - 2L – C + WL – WO
GS = G – 2L – WO

If the opportunity cost is not considered

GL= WL
GS = G – 2L – C + WL
GS = G - 2L

As a result gains from trade are overstated by the opportunity cost of the best available alternative. While complications can be added such as the effect of greater profits on long term investment and what would happen to other workers if the individual choose the best alternative.

(http://possiblylogical.com/blog/)

[Sanity Claws]

1. Economics is only a theory

It fails to explain many things in the real world. For example, the brand of economics dubbed "voodoo economics" aka supply side economics, seems nice in theory but just doesn't work. Accordingly, we have to believe in intelligent design of the market system. We don't understand it therefore the hand of the creator is in it.

[lostinacause]

3. There is fairly good evidence to suggest that both supply side and demand

side economics work in the short term (when coupled with deficit spending) and have consequences in the long term in a closed economy.

Actually economics is a bunch of theories. This is much the same as history, math, engineering and so on. Depending on the theory and the way the market economics can explain the reasons why things behave as they do.

[Sanity Claws]

6. I was joking

It was an allusion to the evolution vs. intelligent design crap going on.

[lostinacause]

8. I see; no wonder it didn't make sense.

[Beetwasher]

2. Looks Like A Job For ProfessorGAC

He's a poster on the board who's and economics professor. Do a search for him and PM. Or he may just see your post if you're lucky.

[lostinacause]

5. Thanks for the info, though don't you have to be a donor to do a search?

[ProfessorGAC]

7. I'm Here!

I'll read the original post and we can discuss by PM.
The Professor

[Beetwasher]

9. Cue Your Favorite Super Hero Theme Song!

Dumm duh duh dummm! Here he comes to save the day! ;-)

[lostinacause]

10. Thanks

[Pithy Cherub]

11. You are going to deprive us all of a learning opportunity too?

:evilgrin:

[ProfessorGAC]

12. Yes. Yes I Am!

Just kidding. Just never sure just how much interest there is in theory and esoterica. I haven't had a chance to read the OP in detail yet. Busy here at work, and just got out of a meeting. So, i was going to read it this weekend and reconnect by PM, rather than resurrect a 4 day old thread. (I'm off Monday. Golf tournament, ya know.)

Anyway, sorry about that. Maybe i can start a new post on Tuesday so anyone interested can read it. That ought to be at least 3 whole people.
The Professor

[Pithy Cherub]

13. Golf restores that whole work/life balance thing

unless you are um, golfing with the boss... Either way have fun!

The OP probably would prefer the PM, so will look forward to other opportunities when the spirit grabs you! :toast:

[ProfessorGAC]

14. My Boss Couldn't Break 100 If The Fate Of The World Depended On It

I'm playing in a Saturday - Monday tournament. One round each Saturday and Sunday (all match play). Then, the top 4 players in each flight play two match play rounds on Monday. Everyone who places in the top 1/3rd gets at least their money back. Everyone who gets to Monday makes at least $300.

It's fully handicapped and i'm going in with a 3.4. I've got a very good chance to play on Monday for some real money.
The Professor

[Horse with no Name]

4. Not at all.

:evilgrin:

[applegrove]

15. Shouldn't you post this on an economics board? THere are many.

[lostinacause]

16. That may have been a good idea. -nt

[Mayberry Machiavelli]

17. You said you were going to explain why Iraq was a 'necessary target' for

invasion, reviewing your web page it doesn't appear that you have done so.

Are you going to?

[lostinacause]

18. I believe my words were either "eventually necessary" or “if done right a

legitimate action”. Yes, I will, There were a few topics that I wanted address before that. Probably within the next two or three. There is an article about Kyoto that is next on line.

[Mayberry Machiavelli]

19. You said "necessary target"

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=104&topic_id=4398426#4399182

While I do believe that Iraq is a necessary target based on the approach I believe in regarding terror, there were some very critical mistakes that bush made.