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A Chinese Economics Professor Explains How Businesses Should Deal With a Stinky Neighbor

Published: Nov. 29, 2021  8:07 p.m.  GMT+8
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Liuzhou’s luosifen could be called one of the four most foul-smelling foods in the world. Photo: VCG
Liuzhou’s luosifen could be called one of the four most foul-smelling foods in the world. Photo: VCG

A family stroll down a food alley provides an opportunity for Chinese economist Li Jingkui to share about the Coase theorem, while holding his breath and fleeing a luosifen stall and its pungent smells. If rights of stallholders are defined and transaction costs are low, then the optimal value of resources in society will be realized. That is, either the luosifen moves away under some compensation from his neighbor or it stays put and his neighbors cope with the negative externalities this presents.

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