“The big place where the economy is threatening to fail to attain its efficient frontier today is in the intellectual property wars: consumers want a lot of high-quality entertainment and information cheap, but one set of producers makes money by selling bandwidth and another set of producers makes money by selling content.”
An instructive way to look at the problem.
Interesting aside — Brad describes the Coase Theorem as saying that if the market doesn’t produce an efficient result, there must be a breakdown in bargaining (wealth effects, transaction costs, hold-out problems, etc.). In law school, we were taught it as: “markets will produce the same outcome, regadless of how rights are assigned… unless there’s a bargaining problem.” A subtle but significant shift in focus. I wonder if this is why policy advocates (usually lawyers) so often mis-paraphrase the Coase Theorem as “markets always work”.