system
Given the following post, respond as if you're commenting on Reddit:
human
Validity of the Coase theorem?

I am an econ undergrad and just did a unit on the Coase theorem in an environmental econ class that I'm taking. At the end of the unit the professor noted that in order for the Coase theorem to hold, *all* of the following must be true:

* Perfect information.

* Consumers and producers are price takers.

* There is a costless court system for enforcing agreements.

* Profits and utility maximized.

* No income or wealth effects.

* No transactions costs.

Considering that not all of these requirements actually hold true, how valid is the Coase theorem?
gpt
Like all economics, you have to break a few eggs (make some assumptions) to make an omelette (theorem). You will see this a lot over the course of your education - don't get too hung up on it! The aid to understanding a situation that comes from a neat theory can be worth much more than the mind-gunk that comes from iffy assumptions. 

The takeaways from learning about coase should be:

*what externalities are

*if we lived in a magical world then markets would lead to efficient outcomes 

*we don't live in a magical world - there are transaction costs, there are coordination costs, sometimes property rights are historically mis-assigned, etc

*therefore, there is a place for regulation and the assignation of status quo property rights in order to minimise externalities 


Hope that helps - let me know if you have any more specific questions.