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Gethsemane

Gethsemane is a garden at the foot of the Mount of Olives in East Jerusalem where, according to the four Gospels of the New Testament, Jesus Christ underwent the Agony in the Garden and was arrested before his crucifixion. It is a place of great resonance in Christianity. There are several small olive groves in church property, all adjacent to each other and identified with biblical Gethsemane.

Etymology
Gethsemane appears in the Greek original of the Gospel of Matthew and the Gospel of Mark as Γεθσημανή. The name is derived from the Aramaic ܓܕܣܡܢ, or Hebrew גַּת שְׁמָנִים (gath shǝmānim) meaning 'oil press'. Matthew 26:36 and Mark 14:32 call it χωρίον, meaning a place or estate. The Gospel of John says Jesus entered a garden (κῆπος, ) with his disciples.

Location
According to the New Testament it was a place that Jesus and his disciples customarily visited, which allowed Judas Iscariot to find him on the night Jesus was arrested.

There are four locations, all of them at or near the western foot of the Mount of Olives, officially claimed by different denominations to be the place where Jesus prayed on the night he was betrayed:

 * 1) The garden at the Catholic Church of All Nations, built over the "Rock of the Agony";
 * 2) The location near the Tomb of the Virgin Mary to the north;
 * 3) The Greek Orthodox location to the east;
 * 4) The Russian Orthodox orchard, next to the Church of Mary Magdalene.

William McClure Thomson, author of The Land and the Book, first published in 1880, wrote: "When I first came to Jerusalem, and for many years afterward, this plot of ground was open to all whenever they chose to come and meditate beneath its very old olive trees. The Latins, however, have within the last few years succeeded in gaining sole possession, and have built a high wall around it. The Greeks have invented another site a little to the north of it. My own impression is that both are wrong. The position is too near the city, and so close to what must have always been the great thoroughfare eastward, that our Lord would scarcely have selected it for retirement on that dangerous and dismal night. I am inclined to place the garden in the secluded vale several hundred yards to the north-east of the present Gethsemane."

All of the foregoing is based on long-held tradition and the conflating of the synoptic accounts of Mark (14:31) and Matthew (26:36) with the Johannine account (John 18:1). Mark and Matthew record that Jesus went to "a place called the oil press (Gethsemane)" and John states he went to a garden near the Kidron Valley. Modern scholarship acknowledges that the exact location of Gethsemane is unknown.

Scriptural basis
According to Luke 22:43–44, Jesus' anguish on the Mount of Olives (Luke does not mention Gethsemane; Luke 22:39–40) was so deep that "his sweat was as it were great drops of blood falling down to the ground."

Near the tomb of Mary
According to the Eastern Orthodox Church tradition, Gethsemane is the garden where the Virgin Mary was buried and was assumed into heaven after her dormition on Mount Zion.

History
The Garden of Gethsemane became a focal site for early Christian pilgrims. It was visited in 333 by the anonymous "Pilgrim of Bordeaux", whose Itinerarium Burdigalense is the earliest description left by a Christian traveler in the Holy Land. In his Onomasticon, Eusebius of Caesarea notes the site of Gethsemane located "at the foot of the Mount of Olives", and he adds that "the faithful were accustomed to go there to pray".

Eight ancient olive trees growing in the Latin site of the garden may be 900 years old (see ).

In 1681 Croatian knights of the Holy Order of Jerusalem, Paul, Antun and James bought the Gethsemane Garden and donated it to the Franciscan community, which owns it to this day. A three-dimensional plate on the right side next to the entrance to the garden describes the aforementioned gift to the community.

Age of the olive trees
A study conducted by the Italian National Research Council (CNR) in 2012 found that three of the olive trees in the garden are amongst the oldest known to science. Dates of AD 1092, 1166 and 1198 were obtained by carbon dating from older parts of the trunks of three trees. DNA tests show that the trees were originally planted from the same parent plant. This could indicate an attempt to keep the lineage of an older individual intact. Possibly, the three trees tested could have been sprouts reviving from the older roots. According to the researchers, "The results of tests on trees in the Garden of Gethsemane have not settled the question of whether the gnarled trees are the very same which sheltered Jesus because olive trees can grow back from roots after being cut down".

However, Mauro Bernabei, author of the paper published as a result of the CNR study, writes: "All the tree trunks are hollow inside so that the central, older wood is missing[...] In the end, only three from a total of eight olive trees could be successfully dated. The dated ancient olive trees do, however, not allow any hypothesis to be made with regard to the age of the remaining five giant olives [sic]."

Archaeology
In 2014, an archaeological survey of the site was conducted by Amit Re'em and David Yeger on behalf of the Israel Antiquities Authority (IAA).

In December 2020, archaeologists revealed the remains of a 1,500-year-old Byzantine church (known as the Church of All Nations) and the foundations of a Second Temple-era ritual bath (also known as a mikveh). According to Dr. Leah and Dr. Rosario, Greek inscriptions were written on the church's floor as: "for the memory and repose of the lovers of Christ… accept the offering of your servants and give them remission of sins".

According to Israel Antiquities Authority's Jerusalem district head Amit Re'em, the uniqueness of the bath is that it is the first archaeological evidence at the site of Gethsemane where Christians have made pilgrimages for centuries.

title: Gethsemane


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Ahrensburg

Ahrensburg is a town in the district of Stormarn, Schleswig-Holstein, Germany. It is located northeast of Hamburg and is part of the Hamburg Metropolitan Region. Its population is around 31,000. Schloss Ahrensburg, the town's symbol, is a Renaissance castle dating from 1595.

Geography
Ahrensburg is situated in the Tunneltal, in which Alfred Rust excavated many items dating back to the ice age.

Ahrensburg is situated next to the Autobahn A1 and on the railway route between the Hanseatic cities of Hamburg and Lübeck.

Early history
The Ahrensburger Tunneltal is a place of numerous excavations from the Upper Paleolithic culture. The culture is called Ahrensburg culture by archaeologists.

Middle Ages
The town dates back to the 13th Century, when the Counts of Schauenburg founded the village of Woldenhorn (which later became the town of Ahrensburg) and the neighbouring villages Ahrensfelde, Meilsdorf and Beimoor. Woldenhorn is first mentioned in the year 1314. The village came into the possession of the Cistercian Reinfeld Abbey in 1327, and Woldenhorn became the seat of the monastery reeve until the middle of the 16th century.

The "Arx Arnsburga", also called Arnesvelde castle, was built around the year 1200. Ruins of the castle are still visible in the Hagen forest to the south of the town. The town coat of arms shows the castle in the upper field. There are records of reeves based in the castle in 1295 and 1304. In 1326, Count John III of Schauenburg had his reeve relocated to Trittau and abandoned the castle.

Modern period
After the dissolution of the monasteries due to the Reformation, the whole area came into the possession of the king of Denmark. He rewarded his general Daniel Rantzau 1567 with lordship over these villages. His brother and heir Peter Rantzau built the Renaissance Ahrensburg Palace in the form of a water castle, now the symbol of the town, and the castle church around 1595. The construction of almshouses directly by the church was exemplary.

The "Ahrensburg Estate" belonged to the so-called Noble Estates, which possessed a large amount of freedom and self-administration.

The Rantzaus' estate was heavily indebted by the middle of the 18th century and, in 1759, was acquired by the businessman Heinrich Carl von Schimmelmann. Schimmelmann remodelled the castle and village in the baroque style and the current layout of the town reflects these plans.

On the 7 June 1867 the estate village Woldenhorn became an independent Prussian country community and renamed itself Ahrensburg after a decision by the community council. It belonged to the "Amt Ahrensburg", from which the "amtsfreie" community once more seceded in 1912.

The construction of the railway between Hamburg and Lübeck in the year 1865 made Ahrensburg a popular destination for outings outside Hamburg and the number of inhabitants increased. By 1910, the population had reached 2,750. The incorporation of various surrounding communities in the year 1928 led to an increase in the town area to about 5 km2.

Building of the settlements "Daheim/Heimgarten" (partially on the territory of the current community of Ammersbek) and "Am Hagen" (originally called "Franz Seldte Settlement") commenced in 1933. The rush of settlers from around Hamburg lead to the creation of the current housing layout.

When Ahrensburg received city rights in 1949, the town had some 17,775 inhabitants – around half of which were refugees from the former eastern German regions.

Erica Keck, who was elected mayor in 1950, became the first female elected mayor in Germany.

Religion
Ahrensburg was the seat of the Stormarn Provost of the Lutheran church from 1823 until 1899.

Ahrensburg had a small Jewish community until the beginning of the 1930s. The Synagogue was burnt down in the Kristallnacht in 1938 during the period of Nazism. The Jewish cemetery (opened in 1822) can still be seen at the edge of town (Ahrensburg-West).

Politics
Since the local election on 26 May 2013, the town council is made up as follows:

Twin towns – sister cities
Ahrensburg is twinned with:
 * 🇪🇸 Esplugues de Llobregat, Spain
 * 🇦🇹 Feldkirchen in Kärnten, Austria
 * 🇩🇪 Ludwigslust, Germany
 * 🇪🇪 Viljandi, Estonia

Honorary citizen

 * 1965 – Alfred Rust (1900–1983), archeologist, controversial because of his membership in the NS-group Ahnenerbe.

Notable people

 * Waldemar Bonsels (1880–1952), author of  Maya the Bee and her adventures
 * Jonathan Meese (born 1970), artist. He grew up in Ahrensburg, attended the Stormarn School and lives in Ahrensburg.
 * Stacie Ahrens (born 1971), artist and author
 * Christian Bass (born 1978), writer, photographer and poet

Personalities who are associated with the city

 * Dagmar Berghoff (born 1943), television presenter and actress
 * Wolfgang Kieling (1924–1987), actor
 * Hellmuth von Mücke (1881–1957), naval officer, politician and writer
 * Benedikt Pliquett (born 1984), goalkeeper
 * Christian Tümpel (1937–2009), university lecturer, theologian and art historian in Nijmegen
 * Daniela Ziegler (born 1948), actress
 * Axel Zwingenberger (born 1955), boogie-woogie pianist

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/

title: Ahrensburg


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Leones de Ponce (basketball)

The Leones de Ponce is a professional basketball team based in Ponce, Puerto Rico, actively participating in the Baloncesto Superior Nacional league (BSN). Founded in 1946, the team has had significant success in the league, earning a total of fourteen championships. This puts them on par with the Atléticos de San Germán and just two titles short of the record held by the Vaqueros de Bayamón. Their most recent championship was won in 2015, after a final match against the Capitanes de Arecibo.

The 50s and 60s
The Leones successes have always been periodical: their first championship came in 1952, 22 years after the beginning of BSN tournaments. They repeated as champions in 1954, but the 1953 championship did not finish when players from Ponce and San German were involved in a brawl which BSN officials could not control. The Leones did not win any more championships until 1960. The 1960s were a glorious decade for the Leones, who repeated in 1961 and then won three peat titles in 1964, 1965 and 1966. The presence of guard Juan "Pachín" Vicens greatly helped the Leones to reach the success they had. He was the key player in an already great roster. His impact can be evidenced by the fact that the Lions venue is named after him. Tex Winter, an assistant coach with the NBA Chicago Bulls championship teams of the 1990s, coached the Leones to their two 1950s titles, while Red Holzman was the main architect of the titles won from '64 to '66.

The 80s
The Leones could not win a championship for 24 years after the 1966 title. In 1984 they reached rock bottom when it was discovered that they had proceeded against the BSN's rules to sign David Ponce. Ponce was an American born Puerto Rican, and he had not spent the three years in Puerto Rico that are necessary for a BSN player to be nationalized, therefore, he was not eligible to play in the league. When this was discovered, a league wide scandal broke out, and the league determined to close the tournament that year by carrying out the Copa Olímpica championship instead of the normal championship finals. The Leones were excluded from participating in the Copa Olímpica. Also, for two years during this decade (1983 and 1984) the Leones line-up featured Puerto Rican superstar Angel Santiago (who would return to the Leones for six games in 1995).

The 1990s
The Leones started rebuilding, acquiring such players as José "Papote" Agosto, Charlie Lanauze, Cesar Bocachica, Francisco "Papiro" León, Julian Rodriguez and their star player, Toñito Colón. With these players, the Leones, contended for the 1989 title, losing in seven games to Mario "Quijote" Morales and the Guaynabo Mets. With the acquisition of veteran Bobby Ríos in 1990, however, the Leones formed one of the most feared roster line-ups in the league. The four key players (Agosto, Lanauze, Colón, and Ríos) were known as the "Four Horsemen of the Apocalypse" in local media for their sharpshooting accuracy. They returned to the finals along with Julian Rodriguez and beat Guaynabo in a rematch. In 1992, coached by Julio Toro, the Leones returned to the throne, beating the Capitanes de Arecibo for the title. A rubber match with Mario Morales and his Mets was played at the 1993 finals, and the Leones prevailed, beating the Mets four games to one. They also reached the finals in 1995, 1996, and 1998.

The 21st century
After 1993, Ponce took nine more years to win a title. With the acquisition of Eddie Casiano and Bobby Joe Hatton in 2001, the team started re-building around them, with remaining key veteran players like Toñito Colón. In 2002, they beat the Vaqueros for the title in seven games. In 2003, the Leones signed former Vaqueros player Jerome Mincy, but they could not repeat as champions despite reaching the finals again. In 2004, in a series marred by controversy (Ponce almost threatened to pull out of game six during the fourth quarter), the Leones won their twelfth championship, defeating the Coamo Marathon Runners in seven games, with a game seven score of 92-77. They dedicated the championship to the city mayor, Rafael Cordero, who died in January of that year.

Hiatus (2011–2012)
Due to financial difficulties the team did not participate in the 2011–12 season.

The Return
On November 2, 2012 an agreement was reached for the sale where Dr. Oscar Santiago acquired the franchise. Under his guidance the team did extremely well after hiring fellow ponceño Nelson Colón as coach from the San Germán Athletics and signing forward Mike Harris and guard Mike Rosario. By the end of the 2013 season, the Lions reached the finals against the Quebradillas Pirates but after a six-game series they failed to win a championship trophy.

A New Era
In 2014 the Lions made their second consecutive finals appearance. This time they defeated the Arecibo Captains in 6 games to achieve their thirteenth championship and the first title in a decade. A year later, the team returned in a rematch of the 2014 finals against the Capitanes. The Lions made their back-to-back title after six games and tied the BSN record, along with the Bayamón Cowboys and the San Germán Athletics, for most overall championships.

2014 FIBA Americas League
Leones de Ponce made its international debut in the 2014 edition of the FIBA Americas League as one of the two teams representing the BSN, accepting an invitation to participate as the runner-up of the league that year. The team was included in Group B, which was hosted by Montevideo. Hindered by the fact that the BSN was off-season (being a summer league, in contrast to the other leagues in the hemisphere) and players abroad, this version of the team relied on local players, particularly a core of inexperienced young players (SF Carlos Emory, PF Chris Gaston and SG Mike Rosario) that was complemented by several veterans that were past their prime (SF/PF Gabriel Colón, PG Guayito Santiago and SG/SF Rick Apodaca), but also included Eric Griffin (PF), Weyinmi Efejuku (G) and Walter Sharpe (PF) as reinforcements.

In their debut, Leones faced Unitri/Uberlândia of the Novo Basquete Brasil, losing 81-85. The team recovered by defeating Club Atlético Lanús, runner-up of the Liga Nacional de Básquet, with scores of 90-73 on their second game. Leones entered the final date of the opening round with possibilities to eliminate Unitri/Uberlândia and advance, but lost to Club Atlético Aguada (third place at the Liga Uruguaya de Basketball, who were also serving as the host of the group and playing in their home court) after Leandro García Morales scored a two-point buzzer-beater for the final score of 92-93.

2017 FIBA Americas League
Leones de Ponce made its return to the FIBA Americas League in the 2017 edition as a measure to develop team chemistry prior to the BSN season, hosting the opening round of Group D at Auditorio Juan Pachín Vicéns. The team combined the regular roster signing of PG Andrés Torres with reinforcements Carlos Arroyo (PG), Filiberto Rivera (PG), Hakim Warrick (PF/C) and Eric Dawson (PF/C), but lost SF Carlos Emory prior to the tournament due to injury. Due to being the only team in the pool not active in a season, exhibition games were held against teams including the Group C Capitanes de Arecibo. Ponce debuted by defeating Academia de la Montaña of Colombia, 76-61. The team then advanced to the following round with a win over Cocodrilos de Caracas, 88-84. Prior to the final game of the group phase the team lost its regular SG Víctor Liz due to a calf injury, going on to lose against Weber Bahía Blanca in overtime, 92-96.

The home team games during the group phase averaged an assistance of 5,000 fans, which satisfied FIBA and led to a request to organize the following round. After securing the role of host for Semifinal F, the team added PF Devon Collier, who joined the now-recovered Liz and Emory. Capitanes de Arecibo served once again as an exhibition opponent on February 27, 2017. In the first game of the semifinal, Ponce defeated Weber Bahía Blanca in a rematch, 95-82. The following night, they lost to Hebraica y Macabi (67-80), causing a four-way tie in the pool. Despite resting regular SF Ángel Daniel Vassallo most of the game due to a knee injury, Ponce defeated San Lorenzo de Almagro with scores of 115-107 (following two overtimes) in the semifinal closer to advance to the final four.

While Barquisimeto in Venezuela became the host of the next stage, the players where given time to recover while the staff scouted the other teams. The team held an exhibition against the Cariduros de Fajardo, before leaving to fulfill the practice sessions scheduled upon their arrival to the South American country. Prior to the round, the team lost Vassallo for the remainder of the tournament with knee complications. Ponce finished this edition in the third place of the grand final, losing to eventual champion and home team Guaros de Lara (87-100) in the pivotal match before rebounding to win the consolation game over Mexico's Fuerza Regia (90-68). After leading the tournament in assists per game, Arroyo was selected as the point guard of the Ideal Team.

2018 FIBA Americas League
After an sponsor supported them, the Leones choose to participate in the 2018 FIBA Americas League despite having limited facilities (due to the passing of hurricane Maria in September 2017) and several roster losses that forced them to rely on nostalgia and bring former members for the tournament. Mike Rosario, Chris Gastón and Miguel Alí Berdiel headlined this makeshift group, which lost Arroyo, Filiberto Rivera and Liz from the previous edition. The team concluded with a record of 1-2, leaving the competition after the conclusion of the first round. Playing abroad at Argentina, Ponce lost to local teams Estudiantes Concordia (66-81) and Regatas Corrientes (76-90), while defeating Hebraica Macabi of Uruguay (86-69).

2019 FIBA Americas League
In November 2018, Leones de Ponce requested participation in the 2019 FIBA Americas League. The following month they were confirmed as members of Group D, along Capitanes de Arecibo, Guaros de Lara and Libertadores de Querétaro. On December 17, 2018, Ponce was confirmed as the host of the group's first round. On Christmas Day, Leones revealed that Arroyo had been signed, while the team made moves to have regular season roster players available (including Vassallo and Liz) and signed Adrian Uter (PF/C), Nick Minnerath (PF/C) and Dane Johnson (PF/C) as reinforcements for the tournament. Efejuku was initially only brought back for the tournament, but later joined the roster as a regular after being nativized (following four years of continued residence) and acquired by Ponce in the 2019 BSN Draft.

Home arena
The team's home court is Juan Pachín Vicéns Auditorium, named after the Ponce basketball legend who won several titles with the Leones and was even declared to be the Best Player of the World during the 1959 FIBA World Championship in Chile. The auditorium opened on May 12, 1972. Initially it had a maximum capacity of 7,786 but numerous remodelations have increased this to exceed 8,000.

Championships
Following are the titles won by the Ponce Leones basketball team.

title: Leones de Ponce (basketball)


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User:HelmutEwald

HelmutEwald ... who is happy about the neutral Wiki point of view that does not automatically mean the main stream point of view.

title: User:HelmutEwald


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User:Hidoshi

Illustrator and event-runner from Ontario, Canada.

My talk page is probably the best way to get in contact with me.

title: User:Hidoshi


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Coase theorem

In law and economics, the Coase theorem describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem is significant because, if true, the conclusion is that it is possible for private individuals to make choices that can solve the problem of market externalities. The theorem states that if the provision of a good or service results in an externality and trade in that good or service is possible, then bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property. A key condition for this outcome is that there are sufficiently low transaction costs in the bargaining and exchange process. This 'theorem' is commonly attributed to Nobel Prize laureate Ronald Coase (quotations noting that Coase's theorem is not a theorem in the strict mathematical sense).

In practice, numerous complications, including imperfect information and poorly defined property rights, can prevent this optimal Coasean bargaining solution. In his 1960 paper, Coase specified the ideal conditions under which the theorem could hold and then also argued that real-world transaction costs are rarely low enough to allow for efficient bargaining. Hence, the theorem is almost always inapplicable to economic reality but is a useful tool in predicting possible economic outcomes.

The Coase theorem is considered an important basis for most modern economic analyses of government regulation, especially in the case of externalities, and it has been used by jurists and legal scholars to analyze and resolve legal disputes. George Stigler summarized the resolution of the externality problem in the absence of transaction costs in a 1966 economics textbook in terms of private and social cost, and for the first time called it a "theorem." Since the 1960s, a voluminous amount of literature on the Coase theorem and its various interpretations, proofs, and criticism has developed and continues to grow.

The theorem
Coase developed his theorem when considering the regulation of radio frequencies. Competing radio stations could use the same frequencies and would therefore interfere with each other's broadcasts. The problem faced by regulators was how to eliminate interference and allocate frequencies to radio stations efficiently. What Coase proposed in 1959 was that as long as property rights in these frequencies were well defined, it ultimately did not matter if adjacent radio stations interfered with each other by broadcasting in the same frequency band. Furthermore, it did not matter to whom the property rights were granted. His reasoning was that the station able to reap the higher economic gain from broadcasting would have an incentive to pay the other station not to interfere.

In the absence of transaction costs, both stations would strike a mutually advantageous deal. It would not matter which station had the initial right to broadcast; eventually, the right to broadcast would end up with the party that was able to put it to the most highly valued use. Of course, the parties themselves would care who was granted the rights initially because this allocation would impact their wealth, but the result of who broadcasts would not change because the parties would trade to the outcome that was overall most efficient. This counterintuitive insight—that the initial imposition of legal entitlement is irrelevant because the parties will eventually reach the same result—is Coase's invariance thesis.

Coase's main point, clarified in his article 'The Problem of Social Cost,' published in 1960 and cited when he was awarded the Nobel Prize in 1991, was that transaction costs, however, could not be neglected, and therefore, the initial allocation of property rights often mattered. As a result, one normative conclusion sometimes drawn from the Coase theorem is that liability should initially be assigned to the actors for whom avoiding the costs associated with the externality problem are the lowest. The problem in real life is that nobody knows ex ante the most valued use of a resource, and also that there exist costs involving the reallocation of resources by government. Another, more refined, normative conclusion also often discussed in law and economics is that government should create institutions that minimize transaction costs, so as to allow misallocations of resources to be corrected as cheaply as possible.

(1) In the case of zero transaction costs, no matter how the rights are initially allocated, negotiations between the parties will lead to the Pareto optimal allocation of resources; (2) In the case of non-zero transaction costs, different rights allocation definitions will lead to different resource allocations; (3) Because of the existence of transaction costs, different rights definitions and allocations will bring about resource allocation with different benefits. Therefore, the establishment of the property rights system is the basis for optimizing resource allocation (to Pareto optimal).

When faced with an externality, the same efficient outcome can be reached without any government intervention as long as the following assumptions hold:

 * 1) Property rights must be clearly defined
 * 2) There must be little to no transactions costs
 * 3) (Following 2.) There must be few affected parties (or else the transactions costs of organizing them gets to be too great).
 * 4) There must be no wealth effects. The efficient solution will be the same, regardless of who gets the initial property rights.

The Coase Theorem shows that the essence of the market is not price, but property rights. As long as there are property rights, people will naturally "negotiate" a reasonable price.

Efficiency and invariance
Because Ronald Coase did not originally intend to set forth any one particular theorem, it has largely been the effort of others who have developed the loose formulation of the Coase theorem. What Coase initially provided was fuel in the form of “counterintuitive insight” that externalities necessarily involved more than a single party engaged in conflicting activities and must be treated as a reciprocal problem. His work explored the relationship between the parties and their conflicting activities and the role of assigned rights/liabilities. While the exact definition of the Coase theorem remains unsettled, there are two issues or claims within the theorem: the results will be efficient and the results in terms of resource allocation will be the same regardless of initial assignments of rights/liabilities.

Efficiency version: aside from transaction costs, the prevailing outcome will be efficient
The zero transaction cost condition is taken to mean that there are no impediments to bargaining. Since any inefficient allocation leaves unexploited contractual opportunities, the allocation cannot be a contractual equilibrium.

Invariance version: aside from transaction costs, the same efficient outcome will prevail
This version fits the legal cases cited by Coase. If it is more efficient to prevent cattle trampling a farmer's fields by fencing in the farm, rather than fencing in the cattle, the outcome of bargaining will be the fence around the farmer's fields, regardless of whether victim rights or unrestricted grazing-rights prevail. Subsequent authors have shown that this version of the theorem is not generally true, however. Changing liability placement changes wealth distribution, which in turn affects demand and prices.

Equivalence version
In his UCLA dissertation and in subsequent work, Steven N. S. Cheung (1969) coined an extension of the Coase theorem: aside from transaction costs, all institutional forms are capable of achieving the same efficient allocation. Contracts, extended markets, and corrective taxation are equally capable of internalizing an externality. To be logically correct, some restrictive assumptions are needed. First, spillover effects must be bilateral. This applies to the cases that Coase investigated. Cattle trample a farmer's fields; a building blocks sunlight to a neighbor's swimming pool; a confectioner disturbs a dentist's patients etc. In each case the source of the externality is matched with a particular victim. It does not apply to pollution generally, since there are typically multiple victims. Equivalence also requires that each institution has equivalent property rights. Victim rights in contract law correspond to victim entitlements in extended markets and to the polluter pays principle in taxation.

Notwithstanding these restrictive assumptions, the equivalence version helps to underscore the Pigouvian fallacies that motivated Coase. Pigouvian taxation is revealed as not the only way to internalize an externality. Market and contractual institutions should also be considered, as well as corrective subsidies. The equivalence theorem also is a springboard for Coase's primary achievement—providing the pillars for the New Institutional Economics. First, the Coasean maximum-value solution becomes a benchmark by which institutions can be compared. And the institutional equivalence result establishes the motive for comparative institutional analysis and suggests the means by which institutions can be compared (according to their respective abilities to economize on transaction costs). The equivalency result also underlies Coase's (1937) proposition that the boundaries of the firm are chosen to minimize transaction costs. Aside from the "marketing costs" of using outside suppliers and the agency costs of central direction inside the firm, whether to put Fisher Body inside or outside of General Motors would have been a matter of indifference.

Application in United States contract and tort law
The Coase Theorem has been used by jurists and legal scholars in the analysis and resolution of disputes involving both contract law and tort law.

In contract law, the Coase theorem is often used as a method to evaluate the relative power of the parties during the negotiation and acceptance of a traditional or classical bargained-for contract.

In modern tort law, application of economic analysis to assign liability for damages was popularized by Judge Learned Hand of the Second Circuit Court of Appeals in his decision, United States v. Carroll Towing Co. 159 F.2d 169 (2d. Cir. 1947). Judge Hand's holding resolved simply that liability could be determined by applying the formula of $$B < PL$$, where $$B$$ is the burden (economic or otherwise) of adequate protection against foreseeable damages, $$P$$ is the probability of damage (or loss) occurring and $$L$$ is the gravity of the resulting injury (loss). This decision flung open the doors of economic analysis in tort cases, thanks in no small part to Judge Hand's popularity among legal scholars.

In resultant scholarship using economic models of analysis, prominently including the Coase theorem, theoretical models demonstrated that, when transaction costs are minimized or nonexistent, the legal appropriation of liability diminishes in importance or disappears completely. In other words, parties will arrive at an economically efficient solution that may ignore the legal framework in place.

Damage from water runoff
Two property owners own land on a mountainside. Property Owner A's land is upstream from Owner B and there is significant, damaging runoff from Owner A's land to Owner B's land. Four scenarios are considered:
 * 1) If a cause of action exists (i.e. B could sue A for damages and win) and the property damage equals $100 while the cost of building a wall to stop the runoff equals $50, the wall will probably exist. Owner A will spend $50 and build the wall in order to prevent a court case where B could claim $100 in damages.
 * 2) If a cause of action exists and the damage equals $50 while the cost of a wall is $100, the wall will not exist. Owner B may sue, win the case and the court will order Owner A to pay B $50. This is cheaper than actually building the wall. Courts rarely order persons to do or not do actions: they prefer monetary awards.
 * 3) If a cause of action does not exist, and the damage equals $100 while the cost of the wall equals $50, the wall will exist. Even though B cannot win the lawsuit, he or she will pay A $50 to build the wall because the wall is less costly than the damages from the runoff.
 * 4) If a cause of action does not exist, and the damage equals $50 while the wall will cost $100, the wall will not exist. B cannot win the lawsuit and the economic realities of trying to get the wall built are prohibitive.

The Coase theorem considers all four of these outcomes logical because the economic incentives will be stronger than legal incentives. Pure or traditional legal analysis will expect that the wall will exist in both scenarios where B has a cause of action and that the wall will never exist if B has no cause of action.

 * 1) a Court of Law orders owner A to limit its operations.
 * 2) a Court of Law orders owner A to compensate Owner B.
 * 3) a Court of Law pays Owner A the gains it makes from causing the runoff.
 * 4) a Court of Law compensates Owner B the losses it makes from bearing the runoff.
 * 5) Owner A pays Owner B the losses it makes from bearing the runoff.
 * 6) Owner B pays Owner A the gains it makes from causing the runoff.

Planting pear trees
The Jones family plants pear trees on their property which is adjacent to the Smith family. The Smith family gets an external benefit from the Jones family's pear trees because they pick up whatever pears fall to the ground on their side of the property line. This is an externality because the Smith family does not pay the Jones family for utility received from gathering the fallen pears and, therefore, does not participate in the market transaction of pear production. It results in the pears being underproduced, which means too few pear trees are planted.

Let's assume the following:

Possible solutions to internalize the externality:

By applying the Coase Theorem two possible solutions arise for internalizing this externality. These solutions can occur because the positive external benefits are clearly identified and we assume that 1) transaction costs are low; 2) property rights are clearly defined.

After realizing that the Smith family gets utility from the Jones family's pear trees, the Jones family thinks it is unfair that the Smiths get utility from picking up the pears that fall from their pear trees. The first option to eliminate the externality could be to put up a net fence that will prevent pears from falling to the ground of the Smith's side property line, which will automatically decrease the Smith family's marginal benefit to 0.

The second option for the Jones could be to impose a cost on the Smith family if they want to continue to get utility from their pear trees. Say, if the Jones family has a MC of $25 for each pear tree produced, it allows them to plant 3 pear trees a year (Jones’ MB = MC). However, if the cost is imposed on the Smiths, the optimal quantity of pear trees produced a year will increase to 4 (Jones’ MB + Smiths’ MB = MC). By internalizing the externality, both the Smith family and the Jones family increase their overall utility by increasing production from 3 pear trees a year to 4. $5 is the maximum price the Smiths are willing to pay for an additional, fourth, pear tree, which implies their marginal benefit to plant a fifth pear tree is 0.

Waterworks Denmark example
Whilst the Coase Theorem remains largely theoretical, a real life example of Coasean bargaining in the negotiations between waterworks and farmers in Denmark was published in 2012. Danish waterworks attempted to establish "voluntary cultivation agreements with Danish farmers". Some main takeaways from this application of the Coase Theorem were that, the farmers tried to receive over compensation by exploiting their information advantage, which in turn may have resulted in waterworks terminating negotiations. Additionally, as asymmetric information is included in transaction costs, by exploiting their information advantage, the farmers prolonged negotiations, thus demonstrating that the Coase theorem is very sensitive to its assumption of low transaction costs.

Criticisms of the theorem
In his later writings, Coase himself expressed frustration that his theorem was often misunderstood. Some mistakenly understood the theorem to mean that markets would always achieve efficient results when transaction costs were low, when in reality his point was almost the exact opposite: because transaction costs are never zero, it cannot be assumed that any institutional arrangement will necessarily be efficient. Others have argued that because transaction costs are never zero it is always appropriate for a government to intervene and regulate, though Coase believed that economists and politicians "tended to over-estimate the advantages which come from governmental regulation." What Coase actually argued is, that it is important to always compare alternative institutional arrangements to see which would come closest to "the unattainable ideal of the world of zero transaction costs."

While most critics find fault with the applicability of the Coase Theorem, a critique of the theorem itself can be found in the 1981 work of the critical legal scholar Duncan Kennedy, who argues that the initial allocation always matters in reality. This is because psychological studies indicate that asking prices often exceed offer prices, due to the so-called endowment effect. Essentially, a person who already has an entitlement is likely to request more to give it up than would a person who started off without the entitlement. The validity of this theoretical critique in practice is addressed in a later section.

An additional critique of the theorem comes from new institutional economist Steven N. S. Cheung who thinks that private property rights are institutions that arise to reduce transaction costs. The existence of private property rights implies that transaction costs are non-zero. If transaction costs are really zero, any property rights system will result in identical and efficient resource allocation, and the assumption of private property rights is not necessary. Therefore, zero transaction costs and private property rights cannot logically coexist.

Lastly, using a game-theoretic model, it has been argued that sometimes it is easier to reach an agreement if the initial property rights are unclear.

Transaction costs
Ronald Coase's work itself emphasized a problem in applying the Coase theorem: transactions are "often extremely costly, sufficiently costly at any rate to prevent many transactions that would be carried out in a world in which the pricing system worked without cost." This isn't a criticism of the theorem itself, since the theorem considers only those situations in which there are no transaction costs. Instead, it is an objection to applications of the theorem that neglect this crucial assumption.

So, a key criticism is that the theorem is almost always inapplicable in economic reality, because real-world transaction costs are rarely low enough to allow for efficient bargaining. (That was the conclusion of Coase's original paper, making him the first 'critic' of using the theorem as a practical solution.) Neo-Keynesian economist James Meade argued that even in a simple case of a beekeeper's bees pollinating a nearby farmer's crops, Coasean bargaining is inefficient (though beekeepers and farmers do make contracts and have for some time).

Chicago school economist David D. Friedman has argued that the fact that an "economist as distinguished as Meade assumed an externality problem was insoluble save for government intervention suggests...the range of problems to which the Coasean solution is relevant may be greater than many would at first guess."

In many cases of externalities, the parties might be a single large factory versus a thousand landowners nearby. In such situations, say the critics, the transaction costs rise extraordinarily high due to the fundamental difficulties in bargaining with a large number of individuals.

However, transaction costs are not only a barrier for situations with large numbers of involved parties. Even in the simplest of situations, with only two individuals, social costs can increase transaction costs to be unreasonably high so as to invalidate the applicability of Coasean bargaining. As economist Jonathan Gruber described in 2016, there are strong social norms that often prevent people from bargaining in most day-to-day situations. Whether it is the awkwardness of the exchange or the fear of greatly under-valuing someone else's property rights, transaction costs can still be quite high even in the most basic interactions that could make use of the Coase Theorem.

Assignment problem
Gruber described three additional issues with attempting to apply the Coase Theorem to real-world situations. The first is known as the assignment problem, and stems from the fact that for most situations with externalities, it is difficult to determine who may be responsible for the externality as well as who is actually affected by it. In the case of a polluted river that reduces the fish population as described by Coase, how can the involved parties determine which factories may have contributed the pollution that specifically harmed the fish, or whether there were any natural factors that interfered in the process. And even if one can determine who exactly is responsible and who is harmed, it is cumbersome to accurately quantify these effects. People cannot easily translate their experiences to monetary values, and they are likely to overstate the harm they have suffered. At the same time, the polluters would likely underestimate the proportion of the externality that they are responsible for.

Game-theoretic critique: hold-out, free-rider problems, complete information assumption
Second, in situations where multiple parties hold the property rights, Coasean bargaining often fails because of the holdout problem. Once all the property owners except for one have accepted the Coasean solution, the last party is able to demand more compensation from the opposing party in order to part with the property right. Knowing this, the other property owners have the incentive to also demand more, leading to the unraveling of the bargaining process.

Lastly, if the side with only one party holds the property rights (so as to avoid the holdout problem), Coasean bargaining still fails, because of the free-rider problem. When the multiple parties on the other side all benefit fairly equally from the results of the negotiations, then each of the parties has the incentive to free-ride, to withhold their payments and withdraw from the negotiations because they can still receive the benefits regardless of whether or not they contribute financially. In 2016, Ellingsen and Paltseva modelled contract negotiation games and showed that the only way to avoid the free-rider problem in situations with multiple parties is to enforce mandatory participation such as through the use of court orders.

In 2009, in their seminal JEI article, Hahnel and Sheeran highlight several major misinterpretations and common assumptions, which when accounted for substantially reduce the applicability of Coase's theorem to real world policy and economic problems. First, they recognize that the solution between a single polluter and single victim is a negotiation—not a market. As such, it is subject to the extensive work on bargaining games, negotiation, and game theory (specifically a "divide the pie" game under incomplete information). This typically yields a broad range of potential negotiated solutions, making it unlikely that the efficient outcome will be the one selected. Rather it is more likely to be determined by a host of factors including the structure of the negotiations, discount rates and other factors of relative bargaining strength (cf. Ariel Rubenstein).

If the negotiation is not a single shot game, then reputation effects may also occur, which can dramatically distort outcomes and may lead to failed negotiation (cf. David M. Kreps, also the chainstore paradox). Second, the information assumptions required to apply Coase's theorem correctly to yield an efficient result are complete information—in other words that both sides lack private information, that their true costs are completely known, not only to themselves but to each other, and that this knowledge state is also common knowledge. When this is not the case, Coasean solutions predictably yield highly inefficient results because of perverse incentives—not "mere" transaction costs.

If the polluter has the ownership rights, it is incentivized to overstate its benefits from polluting, if the victim has the ownership rights, (s)he has the incentive to also misrepresent her/his damages. As a result, under incomplete information (probably the only state of knowledge for most real world negotiations), Coasean bargaining yields predictably inefficient results.

Hahnel and Sheeran emphasize that these failures are not due to behavioral issues or irrationality (although these are quite prevalent (ultimatum game, cognitive biases)), are not due to transaction costs (although these are also quite prevalent), and are not due to absorbing states and inability to pay. Rather, they are due to fundamental theoretical requirements of Coase's theorem (necessary conditions) that are typically grossly misunderstood, and that when not present systematically eliminate the ability of Coaseian approaches to obtain efficient outcomes—locking in inefficient ones. Hahnel and Sheeran conclude that it is highly unlikely that conditions required for an efficient Coaseian solution will exist in any real-world economic situations.

Unconstrained Coasean bargaining ex post may also lead to a hold-up problem ex ante. Thus, even though it is often claimed that Coasean bargaining is an alternative to Pigouvian taxation, it has been argued that in a hold-up situation Coasean bargaining may actually justify a Pigouvian tax. Alternatively, it may be efficient to forbid renegotiation. Yet, there are situations in which a ban on contract renegotiation is not desirable.

Behavioral criticisms of the Coase theorem
Unlike Hahnel and Sheeran, the economist Richard Thaler highlights the importance of behavioral economics in explaining the inability to effectively use the Coase Theorem in practice. Thaler modified his experiments with the Ultimatum game and showed that people were more likely to be concerned with ensuring fairness in negotiations when negotiating over their own tangible property rather than in an abstract sense. This suggests that in practice, people would not be willing to accept the efficient outcomes prescribed by the Coasean bargaining if they deem them to be unfair. So, while the Coase theorem suggests that parties who lose out on property rights should then pursue the property according to how much they value it, this does not often happen in reality. For example, Professor Ward Farnsworth has described how in the aftermath of twenty observed legal nuisance cases, none of the parties ever attempted to engage in Coasean bargaining (as would be expected to reach the most efficient outcome) because of anger at the unfairness of having to bargain. It is possible that Coase and his defenders would simply view this as a non-pecuniary transaction cost, but that may be an unreasonable extension of the concept of transaction costs.

Thaler has also provided experimental evidence for the argument that initial allocations matter, put forth by Duncan Kennedy (as previously noted), among others. When students were trading cash-equivalent tokens, the negotiations resulted in the students who would receive the most cash from a token (as told by the researchers) holding the tokens, as would be predicted by the Coase Theorem. However, when the students were trading property (mugs in this case) that were not directly equivalent to cash, proper Coasean bargaining did not occur as depicted in the adjacent diagram. This is because people generally exhibit an endowment effect, in which they value something more once they actually have possession of it. Thus, the Coase Theorem would not always work in practice because initial allocations of property rights would affect the result of the negotiations.

Coasean bargaining in the presence of Pigouvian taxation
Ian A. MacKenzie and Markus Ohndorf have conducted research on Coasean bargaining in the presence of a Pigouvian tax. This research stems from the common belief within Coasean perspectives that Pigouvian taxation creates distortions and therefore inefficiencies, instead of effectively resolving the problem in question. The research conducted shows that in the presence of a pre-existing Pigouvian tax, Coasean bargaining may be superior. The implications of this policy are regulation at both the federal and state level and environmental litigation and liability. This is because dual regulatory environments exist.

In order to examine whether the hypothesis that Coasean bargaining in the presence of a Pigouvian tax is superior to a scenario without taxation, MacKenzie and Ohndorf had to make certain assumptions. Firstly, they relaxing the assumption of property right allocations, and in doing so had a new take on the Buchanan – Stubblebine – Turvey Theorem. By relaxing this assumption, they are able to conclude that even with a Pigouvian tax levied, efficiency improvements can exist. By creating a more realistic environment with how property rights are allocated, MacKenzie and Ohndorf observed that gains from Coasean exchange are reduced by a Pigouvian tax. Furthermore, their research also shows that it is possible that a pre-existing tax can be efficiency enhancing in the case of environmental litigation and liability. This is because it softens the controversy and therefore, reduces overall spending in litigation.

Therefore, in summary, MacKenzie and Ohndorf's research provides an economic argument in support of Pigouvian taxation in the case where there is the potential for negotiation.

title: Coase theorem


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Talk:Hackers (anthology)

Untitled
I am mostly finished with it, but I don't trust my writing on this kind of thing (book report) too much so if anyone feels like doing a copyedit, I'd appreciate the help. Let me know if you think more info is needed somewhere, remove any extraneous information, etc. I did put the spoilers warning on but I am not sure if I provide too many spoilers or not enough. It'd be kinda hard if you haven't read the stories, but I'd appreciate any help to improve the article. thanks, Dori 06:48, Nov 19, 2003 (UTC)

I really hate the use of hacker or hacking to include cracking into other people's computer systems. I want to distinguish between hacker (programmer) and cracker (security breaker). --Uncle Ed 18:59, 7 Oct 2004 (UTC)

 * I do too, but I also don't like pointing out the differences on every article using the terms. What are you specifically referring to? Notice, that I also started the article Hackers: Heroes of the Computer Revolution, and having read that book I think I know the difference. Of course, crackers are usually a subset of hackers. Additionally, I may have slipped and made a mistake somewhere due to the media brainwashing, so feel free to make any changes. Dori | Talk 23:25, Oct 7, 2004 (UTC)

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title: Talk:Hackers (anthology)


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Pigouvian tax

A Pigouvian tax (also spelled Pigovian tax) is a tax on any market activity that generates negative externalities (i.e., external costs incurred by third parties that are not included in the market price). A Pigouvian tax is a method that tries to internalize negative externalities to achieve the Nash equilibrium and optimal Pareto efficiency. The tax is normally set by the government to correct an undesirable or inefficient market outcome (a market failure) and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.

In the presence of positive externalities (i.e., external public benefits gained by society that are not included in the market price), those who did not consent to be part of the market activity receive the benefit, and the market may under-produce. Similar logic suggests the creation of a Pigouvian subsidy to help consumers pay for socially beneficial products and encourage increased production to generate more positive societal benefits.

An example sometimes cited is a subsidy for the provision of flu vaccines and the public goods (such as education and national defense), research & development, etc.

Pigouvian taxes are named after English economist Arthur Cecil Pigou (1877–1959), who also developed the concept of economic externalities. William Baumol was instrumental in framing Pigou's work in modern economics in 1972.

Pigou's original argument
In 1920, British economist Arthur Cecil Pigou published The Economics of Welfare. In it, he argues that industrialists seek their own marginal private interest. When the marginal social interest diverges from the marginal private interest, the industrialist has no incentive to internalize the marginal social cost. Conversely, Pigou argues, if an industry produces a marginal social benefit, the individuals receiving the benefit have no incentive to pay for that service. Pigou refers to these situations as incidental uncharged disservices and incidental uncharged services, respectively.

Pigou provides numerous illustrations of incidental uncharged disservices. For example, if a contractor builds a factory in the middle of a crowded neighborhood, the factory causes these incidental uncharged disservices: higher congestion, loss of light, and a loss of health for the neighbors. He also references businesses that sell alcohol. The sale of alcohol necessitates higher costs in policemen and prisons, Pigou argues, because of the crime associated with alcohol. In other words, the net private product of alcohol businesses is peculiarly large relative to the net social product of the same business. He suggests that this is why most countries tax alcohol businesses.

The divergence between the marginal private interest and the marginal social interest produces two primary results. First, as already noted, the party receiving the social benefit does not pay for it, and the one creating the social harm does not pay for it. Second, when the marginal social cost exceeds the marginal private benefit, the cost-creator over-produces the product. Ultimately, because non-pecuniary externalities overestimate the social value, they are over-produced.

To deal with over-production, Pigou recommends a tax placed on the offending producer. If the government can accurately gauge the social cost, the tax could equalize the marginal private cost and the marginal social cost. In more specific terms, the producer would have to pay for the non-pecuniary externality that it created. This would effectively reduce the quantity of the product produced, moving the economy back to a healthy equilibrium.

Working of the Pigouvian tax
The diagram illustrates the working of a Pigouvian tax. A tax shifts the marginal private cost curve up by the amount of the externality. If the tax is placed on the quantity of emissions from the factory, the producers have an incentive to reduce output to the socially optimum level. If the tax is placed on the percentage of emissions per unit of production, the factory has the incentive to change to cleaner processes or technology.

Lump-sum tax
In 1980, a new critique of Pigouvian taxes emerged from Dennis Carlton and Glenn Loury. They argued that Pigouvian taxes alone would not create an efficient outcome in the long run, because the taxes controlled only the scale of the individual firms, not the number of firms in the particular industry. In the case of pollution, if the firms each produced a fraction of what they produced before, but the number of firms increased exponentially, the amount of pollution would still increase. To prevent this, Carlton and Loury recommend a policy with the potential to regulate the number of firms in an industry: lump-sum taxes or lump-sum subsidies.

Carlton and Loury present four basic arguments in their article. First, Pigouvian taxes work in the short-term, because the number of firms cannot vary. Second, Pigouvian taxes do not work in the long-term because the number of firms can vary. Third, an industry with a specific number of firms and scale can achieve the long-run social optimum (LRSO). The best option is to add an entry tax for potential firms and a subsidy for current firms to restrict a movement in the number of firms. Fourth, it is possible for a tax policy to create a LRSO.

Robert Kohn responded to this article in "The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities: Comment," saying that a Pigouvian tax on pollution emissions can, in fact, create the long-run social optimum without a lump-sum tax-subsidy. Carlton and Loury responded the same month, clarifying that they were discussing a Pigouvian tax on output; whereas, Kohn was discussing a Pigouvian tax on emissions. Carlton and Loury provide numerical proofs as to why these are different. Ultimately, they argue that there are some cases in which a single tax on emissions will produce the LRSO and others in which a single tax on output will attain the LRSO. Either case only works with the taxes properly determined.

Double-dividend hypothesis
The double-dividend hypothesis proposes that a revenue-neutral substitution of environmental taxes for revenue-raising taxes might offer two benefits. The idea was first advanced by Tullock (1967) in a paper titled 'Excess Benefit'. The first benefit (or dividend) is the benefit or welfare gain resulting from a better environment and less pollution (caused by a Pigouvian tax imposed on the producer), and the second dividend or benefit is a more efficient tax system due to a reduction in the distortions of the revenue-raising tax system, which also produces an improvement in welfare. This idea received scant attention until the early 1990s when the economics of climate change attracted attention to the topic of environmental taxes. The term 'double dividend' became widely used following its introduction by David Pearce in 1991. Pearce noted that estimates of the marginal excess burden (marginal distortionary cost) of existing levels of taxation in the US economy are between 20 and 50 cents per dollar of revenue collected. Because the revenue from the carbon tax would be recycled (used to lower preexisting and distorting taxes), the policy would be revenue-neutral, and the secondary benefit from revenue recycling would justify an even higher carbon tax. It is generally accepted now that the magnitude of the "revenue-recycling" benefit is lower than the 20–50 cents per dollar of revenue, but there are differing views on whether the second effect is positive or negative. The line of argument suggesting that the second "benefit" is negative proposes a previously unrecognized "tax interaction effect" (Bovenberg and de Mooij 1994).

In a 1997 paper, Don Fullerton and Gilbert E. Metcalf evaluated the double dividend hypothesis. They define the double-dividend hypothesis as the theory that environmental taxes can improve the environment and increase economic efficiency simultaneously. Either motivation can legitimately support a tax reform. The first dividend intuitively makes sense: decreasing pollutant emissions improves the environment. The improvement in economic efficiency results from a shift away from distorting taxes such as the income tax. Fullerton and Metcalf note that for every $1 extracted in taxes, a $1.35 burden falls on the economy. In a sense, the private sector must swallow a 35 cent excess burden for no particular reason. The second dividend aims to eliminate some of this excess burden.

Tempting as it may be to try, Fullerton and Metcalf argue, the validity of the double-dividend theory cannot be established as a whole. This does not imply that the double dividend hypothesis is untenable but there is just more complication to that. An observer must evaluate each circumstance individually. Fullerton and Metcalf do provide guidelines for this analysis. Two questions help shape this analysis: what is the status quo? What are the specifics of the reform? The amount and nature of the current taxes, permits, and regulations greatly influence the results of the additional tax. Also, where the tax revenue goes greatly affects the success of the tax.

Secondly, Fullerton and Metcalf say the previous literature on Pigouvian taxes focused too heavily on the revenue dividend and too lightly on the environmental dividend of environmental taxes. Their predecessors naively value revenue too much, Fullerton and Metcalf argue, because they fail to recognize that all taxes impose costs on someone. These taxes could outweigh the environmental benefit. Thus, the government must use the Pigouvian tax revenue to lower another tax if it wants to minimize the economic damage of a tax.

Fullerton and Metcalf also mention that the effectiveness of any sort of Pigouvian tax depends on whether it supplements or replaces an existing pollution regulation. If the tax replaces a pollution regulation, it will most likely be environmentally neutral, even if it is revenue-positive. If it supplements the regulation, it may or may not be environmentally and revenue-neutral, depending on the effectiveness of the original regulation. The status quo substantially affects the outcome of a proposed tax.

Distortionary taxation
A. Lans Bovenberg and Ruud A. Mooij argue that there is a first-best case scenario and a second-best case scenario in their article "Environmental Levies and Distortionary Taxation." In the first-best case, the government does not need to get revenue from distortionary taxes such as the income tax, and the Pigouvian tax can create the long-run social optimum. In the real world, second-best case, the status quo includes an income tax that distorts the labor supply. In this situation, Bovenberg and Mooij write that the best tax comes in below the level of the Pigouvian tax.

Bovenberg and Mooij establish that households consume a dirty good (D) and a clean good (C). If the government taxes D, it can use the earned revenue to lower the labor income tax. At the same time, the tax levied on the firm will increase the price of D. The lowered income tax and the higher consumer prices even each other out, stabilizing the real net wage. But because C's price has not changed and it can substitute for D, consumers will buy C instead of D. Suddenly the government's environmental tax base has eroded and its revenue with it. The government then cannot afford to keep the labor income tax down. Bovenberg and Mooij posit that the increase in the price of goods will outweigh the slight decrease in the income tax. Labor and leisure become more interchangeable the lower the real net wage (or after-tax wage) falls. With this decrease in the real net wage, more people leave the job market. Ultimately, labor bears the cost of all public goods.

Goulder, Parry, and Burtraw agree that the net social welfare after the implementation of a tax hinges on the preexisting tax rate. Don Fullerton agreed with this analysis in 1997 in his article "Environmental Levies and Distortionary Taxation: Comment". He added that lowering the income tax and taxing the dirty good equates with raising the labor tax and subsidizing the clean product. These two policies create the same effects, Fullerton says.

In 1998, Fullerton and Gilbert E. Metcalf explain this theory more thoroughly. They begin by defining terms. The gross wage reflects the pre-tax wage a laborer receives. The simplest form of the net wage is the pre-tax wage minus the income tax. In reality, however, the net wage is the gross wage times one minus the tax rate, all divided by the price of consumption goods. With the status quo income tax, deadweight loss exists. Any addition to the price of consumption goods or an increase in the income tax extends the deadweight loss further. Either of these scenarios lowers the net wage, reducing the supply of labor offered. The supply of labor decreases because of the labor/leisure interchange. If someone gets paid very little, he or she may decide it is no longer worth his or her time to continue in that job. Thus, employment decreases. If the Pigouvian tax, which increases the price of consumption goods, replaces the income tax, Fullerton argues that the net wage is not affected.

This rejection of the double dividend hypothesis found in the "tax interaction" literature was met with surprise and skepticism among economists for a variety of reasons. There are multiple sources of ambiguity, differing definitions of what constitutes a 'double dividend', and confusion caused when comparing models with direct versus indirect tax programs, reliance on comparisons with an unreliable benchmark, and misinterpretation of notation in the literature.

Although the central question for the double dividend hypothesis and the tax interaction literature has been whether the welfare gains from environmental taxation in a second-best world are larger or smaller than in a first-best setting, the Tax Interaction literature takes this central question and frames it indirectly, by asking whether the second-best optimal environmental tax is higher or lower than the first-best Pigouvian rate. This question, too, is not answered directly, because the first-best Pigouvian rate is replaced by a definition of marginal social damages, the value of which changes with the tax level and tax program normalization. This becomes an unreliable and shifting benchmark (Jaeger 2011).

In retrospect, three factors contributed to misleading interpretations in the TI literature: an algebraic error, the use of an unreliable benchmark, and unrecognized compounding or double taxation. As a result, the conclusion that a large, previously unnoticed distortionary tax interaction effect existed can be seen as partly due to misinterpretations (Jaeger 2013). Despite these sources of confusion, it remains the case that a) the possibility of a double dividend depends on specifics specific to the demands and the economy in which an environmental tax is being considered, and b) that the efficiency gains with revenue recycling will be greater, potentially significantly greater, than when revenues are not collected and used to reduce pre-existing revenue-raising taxes. Various research studies using numerical models find evidence in support of the double dividend hypothesis (Jorgensen et al., 2013).

Despite the recent controversy on this topic, the conclusions that can be drawn are in keeping with economic intuition. Environmental and revenue-raising taxes are complementary tools for achieving two different kinds of government goals: the provision of public goods with revenue-motivated taxes and the protection of environmental quality with corrective taxes. Indeed, the joint pursuit of these two goals through taxation can enable the government to justify doing more of each by making the optimal environmental tax higher than it would be otherwise, and by lowering the distortionary cost of financing the provision of public goods.

Alternatives
The Pigouvian tax is a method commonly used by governments as it has relatively low transaction costs associated with implementation. Other methods such as command and control regulations or subsidies assume that the government has complete knowledge of the market, which is almost never the case, and can often lead to inefficiencies and market failure through rent-seeking behavior by individuals and firms.

Second-best optimal Pigouvian taxation (indirect taxation)
Sometimes when the optimal Pigouvian taxation is unfeasible in practice due to technical or political reasons to directly tax the externality, policymakers might opt to tax a product related to the externality indirectly, which will be the second-best optimal solution. For example, to mitigate the negative externalities from emissions produced by transportation policymakers might impose taxes on gasoline rather than emissions directly.

However, this makes everyone face different externalities due to the different number of purchases or the state of the vehicles. According to Knittel and Sandler's research, they found that the SBO taxes are an inefficient means of reducing vehicle emissions. It tends to overtax, resulting in the majority of vehicle owners paying excessive amounts.

No intervention (direct negotiation between parties)
Economist Ronald Coase argued that individuals can come to an agreement with an efficient result without the need for a third party when transaction costs are low. He says it is less expensive and less difficult for two neighbors to come to an agreement about a fence, the amount of noise, or the amount of smoke than it is for these two neighbors to approach a third party to solve the situation for them. Even when several parties are involved, outside interference could result in an inefficient outcome.

Yet, in dynamic settings Coasean bargaining ex post may lead to inefficient investments ex ante (the so-called hold-up problem). For this reason, some authors have argued that unconstrained Coasean bargaining may actually justify Pigouvian taxation.

Firm limits
Instead of taxing the negative externality producer, the government could regulate the production of that negative externality. Fullerton and Metcalf argue that restricting the amount of pollution that all firms in an industry can produce will indirectly reduce the output of all firms. This comprehensive supply reduction will automatically raise the consumption price of the good. These types of command-and-control restrictions stimulate cartel-like profits. Fullerton and Metcalf assert that production costs do not change, and assert that the companies can earn profits over and above what is earned before the regulations even with selling a lower quantity of goods. If the production cost of all firms increased simultaneously due to regulation, the firms may be able to increase the price uniformly. They do not consider the elasticity of products and the effect on the quantity of demand and the industry's final profits.

Cap and trade
Another alternative to applying Pigouvian taxation is for the government to place a limit on the total amount of the production of the output causing the negative externality and create a market for rights to generate that specific output. In the United States since the late 1970s, and in other developed nations since the 1980s, the concept of a market for "pollution rights" has emerged. Giving out the rights for free (or at less than market price) allows polluters to lose less profit or even gain profits (by selling their rights) relative to the unaltered market case.

Goulder, Perry, and Burtraw suggest that selling permits to firms is the best option, but recognize that many firms in the status quo are grandfathered in, meaning they are given exemptions. The authors include an example of the U.S. regulations in coal-fired electrical power plants that require the reduction of 10 million tons of sulfur dioxide emissions. They estimate that more than half of the $907 million preexisting taxes could have been eliminated by auctioning off the permits rather than grandfathering them.

Environmental tax
The environmental tax, including carbon taxes, fuel taxes, severance taxes, land value taxes (LVT) on the unimproved value of land, etc., is a classic example of the Pigouvian tax. It is a means to mitigate greenhouse gas emissions. Some said the environmental tax can deliver incentives to mitigate greenhouse gas emissions due to an increase in prices of fuel, carbon, or other types of taxes, and thus it can influence agents’ decisions economically and have effects on preserving the environment. However, others said that since these kinds of products are imposed taxes, their production prices will be higher, and thus the burden of increases in production costs can be shifted to consumers by increasing prices, which will increase pressure on low-income people and deteriorate income inequality.

According to the research of Manta, Sandler, Bădîrcea, Badareu, and Țăran, they found that although the Pigouvian theory does have effects on the reduction of greenhouse gas emissions, there are different results between developed countries and emerging countries. They revealed that once the Pigouvian tax in emerging countries is beyond the turning point, the effect of the Pigouvian tax on emissions will start decreasing.

Congestion pricing
From an economic aspect, congestion is a negative externality, for drivers can affect other drivers' costs of travel, such as costs of time, miles, or gasoline.

Therefore, in 1920 A. C. Pigou published the first edition of The Economics of Welfare and tried to solve the congestion problem. Although the two-road model provided by Pigou was not intended to suggest the need for Pigouvian taxes to mitigate traffic congestion and thus dropped from subsequent editions, it is thought to be a starting point to analyze the congestion traffic. Since 1963, when William Vickrey published a paper and called for the pricing of traffic based on the welfare economic principle of Pigou, this method started to attend into political aspect in order to resolute the congestion problem in big cities.

Some studies have found that implementing Pigouvian taxes as a solution to congestion externalities in the form of entrance fees or tolls (i.e. congestion pricing) can maximize not only profits but also utility. However, others argued that it would increase the production costs of some industries, and that revenue would fall from the diminution of traffic. Heller, Johnen, and Schmitz argued that the traditional Pigouvian approach is not the optimal solution to the congestion problem. Rather, they believed the optimal solution is to charge drivers a variety of different prices which depend on the desired travel time, i.e. also depend on the number of drivers on the road.

Fat tax
A fat tax is a tax that incorporates unhealthy foods into a society's diet that is made from ingredients considered harmful, such as sugar, starch, and trans fats. Governments implement health policy through education and price risks into food prices through taxes on public health products. Some say that consumers are price-sensitive, therefore, a fat tax can be imposed and used to enforce a healthy diet since the prices of harmful food are distorted by taxes, and consumers will be less willing to buy them.

However, others say that the fat taxes are different from, for example, the tobacco tax. In the case of the tobacco tax the relation between cause and effect is more intuitive and direct, while in the case of the fat tax the relation between cause and effect is more ambiguous and indirect. There is no exact scientific evidence to prove that the nutrients can definitely lead to obesity. Other factors can also have impacts on one’s health, such as age, work, gender, etc.

Nutritional Index Fat Tax (NIFT) is levied on each food based on its food content and also takes into account that specific nutrients do not cause obesity but many substitute nutrients. Therefore, it considers the proportion of ingredients and the impact on obesity of a given food as an indicator, and taxes it according to this index.

However, as with all Pigouvian taxes, some people worry that fat taxes will harm the poor, because once a fat tax is imposed on unhealthy food, low-income people may not be able to afford it, which will lead to a major so-called "sin tax" mistake.

Plastic taxes (e.g on plastic bags)
From January 1, 2021, the plastic tax becomes its own resource in the EU budget 2021–2027. It is not actually a tax but a contribution from member states to the EU, based on the amount of non-recycled plastic packaging waste generated by each member state. The aim is to reduce plastic waste and stimulate member states to develop a circular economy together with the European Plastics Strategy. Each member state can design its own tax legislation to collect the plastic tax from producers, consumers, importers, etc.

Noise taxes
A noise tax is a tax which is put in place to regulate noise pollution, usually in order to not disturb nearby wildlife or communities. The most common cases of noise taxes are to do with the aviation industry and urban infrastructure such as highway construction.

Some examples of noise taxes which have been put in place have been in EU member states, such as France which has a noise tax on the aviation industry (Taxe sur les nuisances sonores aériennes, TNSA). The TNSA taxes both commercial and non-commercial aircraft which enter one of France's 10 busiest airports. The tax is calculated by a series of factors and coefficients, depending on the type of aircraft, weight of aeroplane (MTOW or Maximum Take-Off Weight), airport and timing of the flight. The tax is added up by the total number of flights per aircraft and reaches a higher level after a certain threshold.

Italy also has a noise tax in the aviation industry called the IRESA (Imposta Regionale sulle Emissioni Sonore degli Aeromobili Civili), which is a special-purpose tax, originally formed in 2001 on a national level, and later repurposed into a regional tax in 2013. Similarly to the French noise tax laws, IRESA tax is calculated by calculating a fee based on several attributes, most importantly the regional airport tax rate. A couple of aircraft are exempt from IRESA; Aircraft whose MTOW is below 4.5 metric tonnes, state-owned aircraft, search and rescue, agriculture and firefighting to name a few. The total revenue of IRESA in the Lazio Region was €55mln in 2014.
 * Meat taxes
 * Sugar taxes
 * Tobacco taxes, mainly due to passive smoking
 * Cannabis taxes, mainly due to passive smoking
 * Alcohol taxes
 * Sin taxes in general
 * Luxury taxes
 * Tobin tax against speculation in the financial markets
 * Chewing gum tax; with the proceeds going towards street sweeping and other measures to rectify the pollution from the general thoughtlessness of chewing gum littering.

Criticisms
Most of the criticism of the Pigouvian tax relates to the determination of the tax and the implementation. Pigou and Friedrich Hayek point out that the assumption that the government can determine the marginal social cost of a negative externality and convert that amount into a monetary value is a weakness of the Pigouvian tax. William Baumol suggests that the measurement of social cost is almost impossible. Ronald Coase argues that all social costs are reciprocal in nature, so, once the tax is set, it must not be changed. Some point out that political factors can complicate the implementation of a Pigouvian tax, while others that the Pigouvian tax focuses solely on the market for the product that is responsible for the externality but does not take into account the interconnections with other markets, such as the labor market.

Theoretical problem
In his 2011 paper, "The Problem of Social Cost: What Problem? A Critique of the Reasoning of A.C. Pigou and R.H. Coase" Harold Demsetz provided two main theoretical objections, one of which was many years old, and one of which is new. He argued that both Pigou and Coase were theoretically incorrect to assume that there is a divergence between the social and private marginal product. He showed that property rights are exogenous to the market system. The market achieves the efficient outcome given property rights assignment (this was first pointed out by Frank Knight in 1924). Second, he showed that positive transaction costs are just any other cost. To separate these out to justify a disharmony or divergence between social and private marginal product is theoretically incorrect.

Measurement problem
Arthur Pigou said: "It must be confessed, however, that we seldom know enough to decide in what fields and to what extent the State, on account of [the gaps between private and public costs] could interfere with individual choice." In other words, the economist's blackboard "model" assumes knowledge we don't possess – it's a model with assumed "givens" which are in fact not given to anyone. Friedrich Hayek would argue that this is knowledge which could not be provided as a "given" by any "method" yet discovered, due to insuperable cognitive limits.

William Baumol as well as Polodoo (2008) have argued that it is extraordinarily difficult to measure the social costs of any externality, especially because many costs are psychological and individual. Even if a measurement of the psychological effect of some externality did exist, it would be impossible to collect that data for all individuals affected and then find the optimum output level. Since it is not possible to find the optimum output level, it is not possible to find the optimum Pigouvian tax level to achieve that optimum. In the end, Baumol argues that the best solution is to set a minimum standard of acceptability for negative externalities and create tax systems to achieve those minimum standards. Baumol points out that government committees have a tradition of agreeing on minimum standards, so the practicality of this solution is reasonable.

Peter Boettke brings forth that "The Pigouvian remedy was to bring marginal private costs (subjectively understood) into line with marginal social costs (objectively understood). The problem, James M. Buchanan pointed out, was that the analyst had to specify the conditions under which objectively measurable costs could be ascertained by economic and policy actors. In general, competitive equilibrium, there are also no deviations between marginal private costs and marginal social costs. In other words, Buchanan (like Ronald Coase) pointed out that Pigouvian tax remedies are either possible and redundant or impossible to set because the conditions presupposed for their establishment either eliminate their necessity or (if absent) preclude their enactment." In other words, "Karen I. Vaughn has pointed out the dilemma involved in this situation. To calculate the appropriate corrective tax, the policymaker must know the equilibrium price; yet the situation demanding correction implies a disequilibrium situation."

Reciprocal cost problem
Ronald Coase argues that the tax placed on an industry creating a negative externality should not be changed after it is implemented. The crux of his argument is that all social costs are reciprocal in nature. Coase argues that a factory emitting smoke is not entirely responsible for the social harm of smoky air. If the factory were not there, no one would suffer from smoky air, and if the people were not there, no one would suffer from smoky air. Because of this reciprocity of harm, Coase argues that neither party bears sole responsibility for the social harm, so neither party should pay the full cost. The social harm gets worse, Coase argues, if only one offender pays for the social harm. If the smoke-emitting factory must pay dearly for all its smoke, it will reduce its quantity of production or buy the necessary technology to reduce its smoke rate. With the advent of clean air, neighbors may move into the area. This immediately increases the marginal social cost of smoke, which would require a tax increase on the factory. Essentially, each time the tax increases, the population increases and the marginal cost of the status quo increases again, so the factory is punished for making conditions good enough that people want to move there.

One complexity of this situation is the multiple local maxima or the interchangeable best-case scenarios. It all hinges on the numbers. If the cost of abating all smoke is more than the cost to move the neighbors out, the neighbors should move out and let the factory continue emitting smoke. On the other hand, if it costs less to abate the smoke than to move the neighbors, then the factory ought to pay the tax or buy the clean technology to provide clean air for the surrounding residents. Once the optimum solution is implemented, Coase argues that the tax should not change, regardless of changing circumstances. In this case, if a tax is imposed on the factory and some more neighbors move in, the factory tax should not increase.

Political problem
Political factors such as lobbying of government by polluters may also tend to reduce the level of the tax levied, which will tend to reduce the mitigating effect of the tax; lobbying of government by special interests who calculate the negative utility of the externality higher than others may also tend to increase the level of the tax levied, which will tend to result in a sub-optimal level of production.

Political factors can result in complementary problems when pollution opponents assert irrationally high levels of harm or operate from a hidden agenda of extirpating the polluting agent regardless of the prospects for regulating it to cause minimal harm; regulators are then driven to set absurdly high tax levels, possibly high enough to effectively prohibit operation.

Similarly, lobbyists whose agendas are entirely orthogonal to pollution reduction per se might intervene with regulators to drive tax rates higher or lower, thus preventing optimal operation of the tax. Likely instances of such include organizations intending to lower the polluter's market value as part of a pending plan to buy out its parent entity. Alternatively, there might be efforts to drive the polluter's market value higher prior to its sale. Familiar real-world examples of groups intervening for reason unrelated to pollution reduction include opponents of the polluter's (or the polluter's parent organization's) labor practices and groups with seemingly dogmatic opposition to anything connected to nuclear energy.

Earl A. Thompson and Ronald Batchelder cited one political problem with Pigouvian taxes being that if a firm can influence the tax rate or regulations put on it, the results will not be as certain as Pigou and Baumol suggested. Baumol responded to this, saying that almost all discussions on Pigouvian taxes include the assumption of pure competition.

This certainly does alter the scenario, but the literature had not ignored it; it had merely used a different set of assumptions.

Thomas A. Barthold argued in 1994 that actual policy decisions often come from budget requirements, not a concern for the environment. The taxes do not always parallel raw economic theory because social benefits and costs are hard to measure. He uses the 1987 Montreal Protocol as an example. President George H. W. Bush signed this protocol that allowed either a permit auction or a tax on ozone-depleting chemicals. Barthold attributes the decision to implement the tax to the pressure on the Ways and Means committee to come up with more consistent revenue.

The tax policy also did not accord with basic common sense economic principles. For one, it makes sense to impose a tax on the industry that creates the pollution problem, on the activity that emits the harmful chemicals. This particular activity happened to be the use of automobiles with leaky compressor systems, but because of the high administration cost of taxing that many people, the government decided to tax the producers of those chemicals, though they contributed nothing to the actual problems of chlorofluorocarbons in the atmosphere.

Another evidence of the alternative motivations for this policy is the fact that the base tax increases annually. It is unclear whether the harm from chlorofluorocarbons increases every year and in the same increment, or whether $1.37 per pound accurately reflects the marginal social cost of pollution. The conspicuous hike in the tax in 1992 that equalized the Energy Policy Act's budget further supports the idea of alternative motivations for this policy. Additionally, if the motivation for this tax was solely environmental improvement, then all firms, including those that export goods, would be taxed rather than receiving exemptions.

Barthold noted that politicians often prefer regulations with obvious benefits and hidden costs over those with hidden benefits and obvious costs. For example, politicians may prefer to hand out permits to firms rather than impose a tax on them, even though the tax is more economically efficient. Free permits create winners among grandfathered firms and losers among consumers who have to pay more for the same product. In contrast, taxation makes losers of factory producers and indirect winners of consumers.

title: Pigouvian tax