Abstract:

In the literature, analysis of externalities have been grounded for a long time on Pigou's works. According to him, the state government should intervene in situations by levying taxes, supporting industries or by making arrangements when private and social production differ. Analysis after Pigou largely share this view. Coase brings a different perspective on the concept of externality. He put private cost and social cost of the solution differently from the traditional manner in to the investigation area of the economists. According to Coase both sides are responsible for the creation of negative externalities. In this case, externalities should be addressed in a relationship of reciprocity. Before Coase's work, the idea that externalities could be solved through the market has been neglected for a long time due to the belief in the traditional approach. However Coase’s study highlighted that problems of externalities can also be solved effectively by market. Also, Coase's work discussed the importance of the determination of property rights by law, where positive transaction costs in the real world occur. Concerning the problem of externalities, Coase's different interpretations, neo-classical economics provided a new opening and solution for the problem by the market itself has started to gain weight again. In this study Coase's interpretation which is dealing with the concept of externality with a different approach from the traditional one and Coase theory are examined and discussed in this context.

Keywords: