Friday, April 25, 2014

Economist's Notebook: The Coase Theorem and Lane Hogs

Note: this one have been in the notebook for years, so I bring the old notebook out today after a long hiatus.  

One of The Oregonian's Joe Rose's most common themes is the lane hog.  Whether it be the dratted left-lane hog or the slightly less sinister middle-lane hog.  As Joe points out there is nothing that specifically prohibits either action in Oregon law, and yet there is a clear externality problem when slower drivers clog the left lane (and middle lane).

I think there is a clear Coasian interpretation to this.  The Coase theorem posits that and efficient outcome is more likely in the case of externalities when property rights are well defined.  Here they are not well defined: there is the suggestion that the left lane is for passing but no specific prohibition.

I have always thought that the elegant solution was the one they have in many parts of Europe where 'undertaking' - in our case passing on the right - is forbidden.  This creates a situation where all drivers know that to pass the left lane hogs have to get over and yield the lane. In other words rather then banning the left-lane hog, which requires a difficult definition and even more difficult enforcement.  Simply ban passing on the right and I suspect that soon (as I have observed on the roads of Europe) the rules will be self-enforcing and an efficient equilibrium will arise.

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