Reconciling Coase and Buchanan on the Coase Theorem

The Coase theorem states that in the world of zero transaction costs, utilization of resources will be efficient regardless of how property rights are assigned initially. Buchanan criticizes the zero-transaction-costs qualifier and emphasizes that as long as transactions are agreed upon through free and open processes, then the results are efficient. This paper analyzes the implications of Buchanan's critique, indicates its potential problems, and then attempts to reconcile his view with that of Coase. It is argued that the delicate relationship between objective and subjective values constitutes the link between Coase and Buchanan.