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An Abolitionist Reading of Ronald Coase’s “The Problem of Social Cost"

Updated: Dec 24, 2022

In her widely acclaimed book published in 2003, political activist Angela Davis asked, “Are Prisons Obsolete?” Her words accompanied a wider chorus of activists, who in their aims to end mass incarceration, demanded for a change in approach to how society views crime, punishment, and community. This world is a world that decouples the racism and white supremacy that is argued to be intrinsic in the American penal system. It is a world in which prisons do not exist, and as such give’s individuals access to knowledge and tools to resolve conflicts without always resorting to policing and legal arbitration. Like Angela Davis, many people have endeavored to formalize their own theories in favor of the aforementioned vision and provide their own answers to “Are Prisons Obsolete?” One unlikely response can be found in the highly acclaimed article “The Problem of Social Cost” (1960) by economist Ronald Coase. Following the lead of many abolitionists, Ronald Coase’s article is an exercise in imagining a new world and a change in approach to the status quo. Embedded in his arguments on how economics could be used as a mode of analysis for adjudication, is an image of a world that echoes that of a modern-day prison activist. The aim of this essay is not to argue that Ronald Coase is a prison abolitionist, but rather to explore the salience of Coase's arguments, namely the Coase Theorem and Coase’s views on the delimitation of rights, as both an economic and abolitionist exercise. Specifically centering the analysis within Section VI and VII of his essay, this essay will argue that the change in approach to adjudication that he highlights is one that can contribute to current discussions on prison abolition and perhaps add a more economic framework that is often missing within modern conversations of prison abolition.

To begin, it is important to note that prison abolitionist rhetoric is distinctly tied to the court system and American judicial practices. Discussions on mass incarceration are often also discussions on over-policing (especially in lower socioeconomic communities) and overcrowding of courts. Prison abolitionists are very concerned with prison sentencing and argue against the unpredictability, and at times, the arbitrary nature of criminal sentencing. The abolition framework is also one that is very critical of the way that judges make decisions and as such with the abolition of prison also comes the lessened reliance on faulty judicial authority/legislation on criminality. In “The Problem of Social Cost”, Coase abstracts from discussing crime per se, and speaks to a broader notion of harm and costs[1]. It is these two ideas that undergird his analysis and speak to the ethos of abolition.

Coase’s world is one in which market transactions are costless and where conflicts can be efficiently resolved without the need of the courts. It is a world that exists under perfect competition such that an individual's private product and private costs serve an aggregate function influencing the broader society. He further thinks about solving disputes outside of litigation entirely. That being said, Coase’s arguments do not attempt to speak to the field of “criminal law” in the same way that prison abolitionists explicitly do, yet Coase’s broader themes speak to the same foundations of legality. In situations in which conflict arise, Coase is not interested in assigning absolute blame to one individual to another (in fact, he is highly critical of the courts tendency to assign absolute blame), he rather hopes that with the institution of economic frameworks, that restoration for harm should consider costs on both sides (Coase 13). Taking this notion further, Coase writes how “[economic] analysis in terms of divergences between private benefits and public benefits concentrates attention on particular deficiencies in the system” (Coase 43), and because of this it diverts attention from commonly utilized corrective measures that tend to produce even more social harms. Coasian courts are therefore institutions that incorporate systemic inefficiencies[2] into their analysis. To the prison abolitionist, a systemic approach is a necessary practice for reducing mass incarceration. Coasian courts suggest that the application of economics (with a goal of economic efficiency) to assign liability should be adopted by the courts so that the delimitation of rights by judicial decision making considers the potential economic consequences of such decisions (Coase 15). The abolitionist readings of this would suggest that judges, in their act of sentencing, should also consider systemic barriers that lead individuals to crime, and also understand that incarceration produces its own set of costs that do not actually incur a social benefit. These costs not only include that which can be described in monetary terms, but also the costs of violence, negotiations, etc.

There are many pillars that uphold the Coasian world, such as the existence of parties with perfect information and timelessness. These seemingly unattainable standards are often brought up in critiques of the Coase Theorem. In the same vein, many opponents of prison abolition often criticize abolition as “too idealistic” and “impossible to apply”. However, it is not Coase’s aim to argue in favor of (or even the existence of) such a perfect world where these conditions exist. The true exercise of Coase is to reinforce the importance of law in creating a more efficient society. It is also an attempt to reimagine how costs are adjudicated — especially if the role of a judge is to help bring about a restoration of these costs.

In the same way that Coase is not fully advocating for deregulation to bring about his costless society, decarceration asks us to explore the extents of how the American penal system is the fulcrum of our society and pushes for its application to be focused on efficiency since incarceration confers enormous costs (construed broadly). What's at stake for the prison abolition is less about moving away from the courts system but more so how abolitionist praxis can help judges judge well. This means viewing crime holistically, and somewhat understanding the full cost of crime that incorporates one’s private behavior’s impact on social well-being.

[1] For the purposes of this paper, “harm” should be understood to include notions of crime and violence. [2] Such as the high transactions costs of litigation (Coase 18)

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