The Coase theorem asserts that government intervention is a prerequisite for addressing externality problems.

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The Coase theorem suggests that if property rights are properly assigned and transaction costs are low, interested parties can negotiate a mutually beneficial solution to externalities without government intervention. The government may still be needed in some cases where property rights are unclear or transaction costs are prohibitively high.

The Coase Theorem Asserts That Government Intervention Is a Prerequisite