The document summarizes The Problem of Social Cost by R.H. Coase. It discusses how standard economic analysis treats negative externalities, but neglects that problems have a reciprocal nature. It presents Coase's theorem, which states that if property rights are well-defined, the parties involved can bargain to reach the optimal allocation through negotiation, independently of the initial allocation of property rights. However, transaction costs may prevent this optimal outcome from being achieved.

1. The Problem of Social Cost R. H. Coase (1960) Mikhail Dubov