One does not have to resort to radical critiques for discussions of the 
problem that Hunt discusses under the title "the invisible foot." Coase 
has referred to this as blackmail.

"Coase himself has been well aware of specific problems which arise from 
the problem of extortion. In his original article, Coase [1960] rather 
briefly touched upon the question. primarily arguing that extortion may 
arise in either liability regime. In Coase [1988], he has discussed the 
problem in more detail, identifying extortion as a threat to do 
something which the extortioner has no other interest in doing than to 
extract money from the victim." (Buchholz and Haslbeck (1997: 639).

The substance of the problem is that the assumption that a person has a 
legal right to control the behavior A, which causes harm to another, 
does not necessarily imply that she also has the legal right to perform 
the behavior B, which has a different externally harmful effect. 
Behavior A might be "to produce a good for profit from sales which, in 
the process, causes pollution" while behavior B could be "to produce 
pollution in order to extort a bribe."

The key to understanding Coase in this matter as in many others is that 
he defines a resource as a legal right to control a behavior that has an 
external effect. In this case, polluting behavior has the capacity of 
generating two different types of external effects. So Coase would 
analyze the problem by conceiving of two separate resources. [Polluting 
aimed at extorting a bribe might be called a negative resource, like the 
concept of a "bad"] A number of questions are raised by this approach 
but I do not believe the one discussed in earlier emails on "Coase's 
deficiencies is among them."

Buchholz, W. and C. Haslbeck. (1997)?Strategic Manipulation of Property 
Rights in Coasean Bargaining.? Journal of Institutional and Theoretical 
Economics. 153 (4): 630-640.

Coase, R. H.(1988) Blackmail, Virginia Law Review. 7 (4): 655-76)


Pat Gunning