PROPERTY RIGHTS, THE COASE THEOREM AND INFORMALITY 1 Martín Krause Professor of Economics, University of Buenos Aires Austrian economists have had a bivalent view of the foundational contributions of Ronald Coase to modern law and economics, particularly on what was later called the “Coase Theorem” (Coase, 1960), and a much more critical view on the following “efficiency” view of law. A benign interpretation would stress his critique of general equilibrium theorizing, the need to consider the institutional framework when transactions costs are sufficiently high to prevent bilateral negotiations and his rejection of Pigou’s policy proposals of subsidies and taxes to solve problems of positive and negative externalities (Boettke, 1997). In this view, Coase is a pioneer and a main contributor to the now flourishing concern on the role of institutions and, with that, joining a long Austrian involvement on the subject, already present in Menger’s work. This view also stresses the importance of voluntary solutions to problems of negative externalities, not considered in Pigou’s view. A second interpretation, which may not exclude the first, rejects a view on the “reciprocal nature of harm” and, most of all, his proposal that under the presence of transaction costs “what has to be decided is whether the gain from preventing the harm is greater than the loss which would be suffered as a result of stopping the action which produces the harm” (Coase, p. 27) i , with the corresponding advice to judges, probably coming from some Coase’s followers than from Coase himself, to apportion rights following a cost and benefit analysis in a way to maximize the 1 The author would like to thank Nicolas Maloberti, Nicolas Cachanosky and Max Stearns for some helpful comments on earlier drafts. Responsibility for errors remains with the author only.