ot of all concerned.” The neighborhood’s utility is increased by not having Hawes in the neighborhood, while Hawes’ utility is no worse off by his mom receiving the fair market value of the property and moving to a different community.Coase Theorem, transaction costs, and externalities:The Coase theorem assures that, absent transaction costs, resources and rights will end up in the hands of those who value them most. In this situation, despite the transaction costs, the house ended up in the hands of the people that valued it the most. The transaction costs in this problem were minimal and limited to the costs for meetings regarding Hawes, preventative education measures (i.e., watchdog information, use of deadly force research), coordination of the neighborhood, and communication with Ms. Brewton and the bank. The larger number of involved parties meant increased difficulty in coordination, mortgage lending, etc., but did not raise the transaction costs high enough to prevent a transactionThis problem also involved externalities that must be examined. The purchase deprived Hawes of living in familiar surroundings in which he might be able to adapt to society more quickly. This can be viewed as a negative externality because the activity of the neighborhood imposed a cost on Hawes. Additionally, there are positive externalities for the neighbors who chose not to pay to remove Hawes. The neighbors not paying for the mortgage are reaping the benefits of the activities of others without paying for those benefits. This is also known as free riding. In the end, who really is a winner in a situation like this? The neighborhood rid itself of a convicted sex offender, but at least three families will be making hefty payments as a result. Certainly, Jonathan Hawes is not a winner because he will be branded a sex offender for life under Megan’s law, even if he becomes a productive member of society. The next ...
