Land reform – Fabella weighs in

The problem with land reform as it is in the Philippines is that it is “inefficient,” so says Prof.  Raul Fabella of the UP School of Economics.  It simply “redistributes poverty!”

I agree.  Please see my Solomonic bargain analysis, which in Fabella’s piece shows up implicitly as a plea to allow the Coase Theorem to work.

In its simplest version, the Coase Theorem states that in the absence of transactions costs, people would make bargains toward “efficient” outcomes that are independent of the initial distribution of property rights.  (But since the real world has transactions costs, the distribution of property rights still determines final outcomes.)  The Coase theorem serves as an intellectual underpinning of the idea that government is not a necessary instrument for bringing about economic efficiency.  Coase illustrated this idea in an article written in 1974 about how lighthouses came into being without the coercive power of government.

The trick to land reform is to limit or eliminate transaction costs, as well as “game playing” (also called rent-seeking) by its participants.  This is explained to some extent in my earlier post on Solomonic bargaining.

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