Ronald Cause wrote an essay titled "The Problem of Social Cost":
Coase argued that if we lived in a world without transaction costs, people would bargain with one another to produce the most efficient distribution of resources, regardless of the initial allocation. This is superior to allocation through litigation.[1] Coase used the example of a nuisance case named Sturges v. Bridgman, where a noisy sweetmaker and a quiet doctor were neighbours and went to court to see who should have to move.[2] Coase said that regardless of whether the judge ruled that the sweetmaker had to stop using his machinery, or that the doctor had to put up with it, they could strike a mutually beneficial bargain about who moves house that reaches the same outcome of resource distribution....
In cases like these with potentially high transaction costs, the law ought to produce an outcome similar to what would result if the transaction costs were eliminated. Hence courts should be guided by the most efficient solution.
The ultimate thesis is that law and regulation are not as important or effective at helping people as lawyers and government planners believe.[4] Coase and others like him wanted a change of approach, to put the burden of proof for positive effects on a government that was intervening in the market, by analysing the costs of action.[5]
The argument forms the basis of the Coase Theorem as labeled by George Stigler.
Source: http://en.wikipedia.org/wiki/The_Problem_of_Social_Cost
I'm not so happy with the examples described above. But would rather like to focus on the question wheter there is something like social cost (or social benefits). By that I mean costs or benefits that are not grasped by usual transaction in business or of a private nature. Examples I can think of relate to peace, threat perceptions, healthy environment, social values affecting prosperity of individuals etc. A resulting question could be how would these be managed, maintained or harmed.
The sixth in a series of ten lectures, presented at the "Radical Austrianism, Radical Libertarianism" seminar, hosted by the Mises Institute. Recorded 07/27/2005 [1:27:52]
so assume that there are transaction costs that keep utopia at bay, what is a better mechanism for helping people deal with transaction costs? secure property rights and private institutions of law and security?, or debasing private property and setting up a monopoly with rights to administer law and security. ?
well the latter guarantees higher transaction costs doesnt it?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring