In their paper “Motive attribution asymmetry for love vs. hate drives intractable conflict,” Adam Waytz, Liane Young and Jeremy Ginge appear to extend the logic of the Coase Theorem into the domain of politics. Specifically, Waytz, Young, and Ginge study the problem of “motive attribution asymmetry,” i.e., the belief that people who disagree with you have motives that are bad. Among other things, they found that “offering Democrats and Republicans financial incentives for accuracy in evaluating the opposing party can mitigate this bias …” This is an exciting and promising research agenda, but if we can pay people to be less biased, couldn’t we also pay people to be more biased as well? Consider, in addition, this hypothetical scenario, courtesy of Sandeep Baliga (emphasis by us):
I have a bad, bad neighbor. He’s actually a lovely guy but he spoils his kids and let’s them do crazy stuff … My kids are quite envious of the neighbor’s kids. They’re allowed to perform death-defying acts our kids can only dream of doing. My kids think I’m a bad dad because I won’t let them do death-defying stuff. So I had a chat with the neighbor to try to persuade him to internalize externalities. Unfortunately, he is an argumentative lawyer. He appears to have heard of the Coase Theorem. So he says I should pay him to be a good neighbor. After all, he wants to indulge his children so, for him, doing what I want has a negative effect. I super-Coased him and pointed out that my transferring stuff to him creates perverse effects – he has the incentive to create more crazy activities – perhaps even ones he himself thinks are crazy to extract surplus from me … So, really, he should pay me not me pay him. That was my counter-proposal … (Of course many elements of the post are fictionalized and are a composite of many experiences and incidents, most involving my spouse.)
In other words, Sandeep’s bad neighbor wants to be paid to stop doing bad things. But Sandeep (quite rightly) doesn’t want to reward his bad neighbor’s bad behavior, and his counter-proposal is pure genius, but isn’t it subject to the problem of infinite regress? That is, couldn’t his bad neighbor simply make a counter-counter-proposal in response to Sandeep’s counter-proposal? If so, where does this logic end? In short, how do Coasean bargains get made when there are infinitely many ways of dividing a surplus?