ABSTRACT
It is important to bear in mind when contemplating ‘The Problem of Social Cost’ that this was not a work created de novo; its basic elements, including the negotiation result, were present in his 1959 Journal of Law and Economics article, ‘The Federal Communications Commission’ (hereinafter, The FCC) (Coase, 1959). This article argued (among other things) that the Commission should consider replacing its fiat-based system of broadcast frequency allocation with a market-based system – one in which rights in the spectrum would be auctioned off or handed out by the Commission, but with the provision that the rights be exchangeable in the marketplace. These rights, Coase noted, are valuable inputs to the production of goods and services, and there was no reason, as he saw it, why the allocation of these rights should not be determined through the pricing system just as are other inputs. The idea, of course, was that these rights would end up in the hands of those who valued themmost highly and thus that the inefficient fiat-based system would be supplanted by an efficient allocation based on market principles.
