Coasian Contracts in the Coeur d’Alene Mining District
By Robert Higgs
This article appeared in the Fall 2012 issue of The Independent Review


Located in the Idaho panhandle, the Coeur d’Alene mining district has the largest recorded silver production in the world. Its early history is rich with examples of how, in the absence of government regulations and mitigation taxes, private parties negotiated contracts that greatly reduced the spillover costs associated with mining and milling minerals.


For the greater part of the twentieth century, mainstream economists viewed negative (technological) externalities as a prima facie justification for government intervention in the market. Absent such government action, they argued, nothing would be done to prevent or remedy the damages third parties suffered as a result of unrestrained “spillovers” or “neighborhood effects.” For example, in the words of Joseph E. Stiglitz, “without government intervention there would be an underprovision of pollution control” (1988, 76). Even such staunch defenders of the market as Milton Friedman (1962, 30) and F. A. Hayek (1979, 43–45) conceded that spillovers might justify government intervention, although they embraced neither the “blackboard economics” conclusion that government intervention is desirable and effective in all cases of spillovers nor the “nirvana” standard implicit in Stiglitz’s use of the neoclassical welfare-economics term underprovision....

Other Independent Review articles by Robert Higgs
    Fall 2015   How Big Is Government in the United States?
    Summer 2015   Gross Domestic Product—an Index of Economic Welfare or a Meaningless Metric?
    Spring 2015   Compassion—a Critical Factor for Attaining and Maintaining a Free Society
[View All (51)]

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