Review of Austrian Economics, 13: 193–208 (2000) c ° 2000 Kluwer Academic Publishers Chasing Phantoms in a Hollow Defense of Coase

Abstract. Patrick Gunning refuses to acknowledge the most salient arguments against the “Chicago ” law and economics case for negligence made by Austrian economists. Because of this, he makes the same errors in his defense of Coase that permeate the Chicago paradigm. In particular, his defense of Coasean type analysis completely ignores Austrian cost theory, i.e., that all economically relevant costs are strictly subjective and therefore conceptually impossible to measure. He also fails to grasp the implications of disequilibrium market process theory for the use of any kind of least-cost-avoider rule in the economic analysis of the law. As a result, Gunning’s defense of Coase suffers from the same “pretense of knowledge ” as the analysis that he is defending. JEL classification: O24, O25, 916. “Referring to Coase’s farmer-rancher case [where transactions costs are low], he [Cordato] suggests that even if property titles are clearly defined so that the farmer has full rights to the products of his effort on the land, the Coasean judge might consider awarding the right of use to the rancher, whose cattle strayed onto the land: ::Coase would not recommend that judges be given the power to transfer the right from the owner to a non-owner. ” (Gunning: pg. 184) “First, [in the farmer-rancher case] it still can be concluded, in the absence of insur