In universities, conflicts over the use of common spaces in dormitories have always been a significant cause of contradictions in student life. Due to limited space and the considerable differences in everyone's routines and habits, various conflicts are likely to arise. Recently, I overheard the following conversation in the school cafeteria:

A male student asked four other male students walking towards him, "Where are you guys going?" They replied, "Going out to play online games." The male student responded, "Isn't it nice to play games in the dormitory?" They answered, "Someone is sleeping in the dormitory." As a university teacher, on one hand, I find the students' lively and concise Q&A very interesting; on the other hand, I also noticed that the ways of entertainment are similar to those of a decade ago. However, if we think about it from the perspective of the Coase Theorem, you will find this matter quite interesting.

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The Coase Theorem posits that if transaction costs are zero, regardless of how property rights are initially allocated, resources will ultimately belong to those who value them the most, thereby achieving the optimization of social resources. Undoubtedly, in the aforementioned conversation, the right to sleep is considered a high-value matter in the dormitory convention, and the utility it brings is at least higher than the happiness utility brought by the other few playing games.

As a legal economics researcher, the question we care about is: How is "equilibrium" achieved? How do several people who have never met before college establish rules and contracts for the use of dormitory common spaces and clarify the priority order of dormitory usage rights through daily life interactions?

Coase believes that negotiations between parties are the best way to resolve property rights issues. In dormitory life, students also delineate the boundaries of who has the right to enjoy the quiet of the dormitory, who has the right to play games, and many other rights through their daily interactions. If conflicts arise, there may even be payment transactions.

Imagine the night before the final exam of a core course, you want to review for the exam in the dormitory, but your roommate has invited a few fellow townspeople to play poker in the dormitory. Everyone believes they have the right to dominate the use of the dormitory. If property rights are unclear (no clear rules or contracts have been formed), conflicts will arise. If the dormitory rules formed in the past clearly prioritize the right to study quietly, then your roommate, if they believe that the utility of playing cards in the dormitory is higher than that of playing cards in the chess and card room, can pay you the difference, allowing you to study in the library outside or in a paid study room, and you will receive a corresponding subsidy. If the dormitory rules formed in the past consider the right to entertainment as a priority, then you can pay the difference to your roommate and ask them to play cards in other places. The welfare improvement brought by this may be the greatest.

Without negotiation and property rights definition, it may lead to unilateral long-term endurance, which will further intensify the contradictions. If it is handled through a way other than a "contract" reached through collective negotiation, the operating costs and organizational costs of informal systems will also be very high. Given that the roles of playing cards and reviewing are not fixed, everyone may become a "victim" and a "beneficiary". To reduce transaction costs and life contradictions, it is very necessary to define property rights. Stable expectations and convincing contracts can clearly reduce the uncertainty of interaction and transactions, reduce organizational and transaction costs, and achieve positive interaction. This is also the most valuable lesson I believe that college freshmen who are about to enter university and start dormitory life should learn from the Coase Theorem.

Legal economics, pioneered by Coase and others, is a method of legal analysis that emerged in the 1960s. It introduces microeconomics, cost-benefit analysis, and welfare economics to study the rationality behind legislative activities, judicial execution, and the structure of legal systems, as well as their impact on economic activities. Through incentive theory, game and equilibrium analysis, it provides theoretical guidance and policy recommendations for the formulation and reform of laws, and is highly regarded worldwide. The property rights theory and transaction cost concept proposed by Coase have also had a huge impact on China's reform and opening up.

In modern macroeconomic theory, economic growth is usually characterized by Y=A·F(K,L). This formula includes both the scale output brought by capital (K) and labor (L) inputs, as well as the economic growth momentum brought by technological progress (A) and optimization of production organization forms (F).

If we break it down into four elements: science and technology, property rights and organizational forms, capital and labor, we find that at the beginning of the reform and opening up, China not only protected technological progress by enacting patent laws and legally establishing and protecting property rights, but also protected investment and promoted capital formation through commercial laws such as the Company Law. It also paid attention to the legal protection of workers and consumers, achieving significant achievements in the construction of the rule of law. This shows that the law is no longer an exogenous variable in economic development, and the establishment and execution of the legal system and other factors will have a reactive and promoting effect on the economy.Among various measures, the household responsibility system, as a significant institutional arrangement for liberating rural productivity, originated from rural production practices. Law and economics posit that when market transaction costs are excessively high, rights should be vested in those who value them the most. In the winter of 1978, when 18 farmers from Xiaogang Village in Fengyang County, Anhui, pressed their fingerprints on a contract, we can still sense the pressure to act and the transaction costs imposed on farmers by the policy environment at that time. When transaction costs become so high that they hinder production and trade, institutional adjustments and reforms must be made to promote the development of productivity.

Law and economics argue that when market transaction costs are excessively high, rights should be vested in those who value them the most.

"After fulfilling the state's quota, ensuring the collective's share, what remains is one's own." Why could this simple slogan unleash tremendous productive capacity? Comparing the levels of agricultural technology, rural labor input, and production material input before and after the implementation of the household responsibility system, it was precisely the change in the production organization form of the contract responsibility system that mobilized the farmers' enthusiasm. The contract responsibility system innovatively determined the farmers as the owners of the residual claimancy rights to the outcomes of production activities, clearly defining the distribution method in a lump-sum form, creating a de facto incentive for distribution according to work and the glory of labor, encouraging farmers to invest their intelligence and talents in production, and promoting the liberation of productivity. Under the original rural collective planned economy and the "big pot" system, there was inevitably a power structure responsible for registration, review, and planned distribution, leading to rent-seeking economic motives for distribution power, which in turn resulted in a low-level equilibrium in rural production structure and organizational form.

Through reform and opening up, we have completed the separation of rural land ownership and usage rights. In 1993, the National People's Congress clarified in the constitutional amendment that "the household responsibility system based on contracted output as the main form in rural areas, along with various forms of cooperative economy such as production, supply and marketing, credit, and consumption, is the collective ownership economy of the socialist working masses." By building a property rights system, constructing a favorable legal environment, and improving incentive mechanisms, personal interests and social interests tend to align, reducing the restrictions on rational actors, allowing agriculture to be produced in the most efficient manner. Coupled with slogans like "getting rich is glorious" and "poverty is not socialism," this has propelled the shift from a low-level equilibrium in rural production, where everyone participates in production and becomes wealthy, to a high-level equilibrium, where everyone greatly promotes the liberation of productivity in the pursuit of improving their own lives.

In addition to playing a significant role in daily life and macroeconomic development, under new economic conditions, Coase's theorem remains highly important. Whether it is the property rights definition of copyright brought about by generative artificial intelligence or the information collection and data rights of user behavior and transaction habits under the platform economy, Coase's theorem is indispensable in helping the parties involved in transactions to engage in games and negotiations, better delineate rights, and ensure the stability of transaction expectations. It can be anticipated that in future economic development and the analysis of human behavior, Mr. Coase's wisdom will certainly play a more important role, also providing more intellectual light for the definition of property rights under the new economy.