Why doesn’t the Coase Theorem work in Gaza?

The “Coase Theorem” is a beautiful prediction or simple model from the world of academic economics that does not always hold up in the real world. (Look it up.) (Bonus link: check out our related research on this topic “Does the Prisoner’s Dilemma refute the Coase Theorem?” Spoiler alert: yes.) In theory, for example, the Coase Theorem should apply to the ongoing conflict in Palestine, since “transaction costs” between the leaders of Israel and the leaders of the Hamas movement in the Gaza Strip are low (after all, there are only two major parties to the negotiation), and since both parties would benefit from a peaceful resolution of their differences. Yet, there is war, and even negotiating a humanitarian cease-fire has proven elusive. In any case, isn’t this a problem of a reciprocal nature, to borrow the late Ronald Coase’s apt phrase? Or in the words of Israeli prime minister Benjamin Netanyahu, as quoted by Jonah Goldberg in this excellent essay, “Here’s the difference between us (the IDF and Hamas). “We’re using missile defense to protect our civilians, and they’re using their civilians to protect their missiles.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
This entry was posted in Current Affairs, Economics, Game Theory and tagged , , . Bookmark the permalink.

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