Question

Passage A
In his foundational analysis of social cost, Ronald Coase established that under conditions of frictionless exchange—where transaction costs are zero—the initial legal assignment of an entitlement will not dictate the ultimate allocation of resources. Assuming rational actors seeking to maximize their respective positions, parties will simply bargain until the entitlement resides with whichever stakeholder values it most highly. An efficient outcome is thus secured regardless of whether the legal rule initially grants an industrial factory the right to emit pollutants or grants adjacent homeowners the right to clean air. Conventional law and economics scholars have long treated this invariance proposition as a vital organizing principle for institutional and judicial design. When the costs of identifying negotiating partners, measuring damages, and drafting enforceable agreements are negligible, legal institutions need not shoulder the fraught evidentiary burden of attempting to calculate which party derives superior subjective utility from a contested resource. Rather, the proper judicial role is strictly facilitative: courts should focus primarily on delineating unambiguous, alienable property boundaries and dismantling procedural obstacles to private trade. Under this classical framework, economic actors are presumed to possess stable, exogenous valuation functions that exist independently of legal rules; transparent property rights ensure that voluntary market exchanges will reliably steer entitlements toward their highest-value social use.

Passage B
While the Coasean invariance proposition remains logically coherent within neoclassical price theory, empirical research in behavioral economics reveals a profound flaw in its foundational psychological premises. In extensive experimental trials, human decision-makers consistently exhibit an "endowment effect"—a robust cognitive asymmetry wherein an individual's minimum willingness to accept compensation to relinquish a legally recognized entitlement substantially exceeds their maximum willingness to pay to acquire that exact same entitlement. This valuation gap emerges because individuals evaluate potential outcomes relative to a psychological reference point established by their current legal status quo, perceiving the forfeiture of an endowed right far more acutely than the failure to secure an equivalent benefit. Consequently, the initial legal distribution of entitlements is never economically neutral. Even in idealized institutional settings completely devoid of conventional transaction costs, the psychological attachment and loss aversion engendered by initial legal possession frequently paralyze voluntary bargaining, preventing entitlements from moving to the party who would have valued them most in the absence of the initial grant. Legal rules do not simply allocate neutral bargaining chips among autonomous calculators with static preferences; rather, the state's initial assignment of rights actively constructs those valuations, rendering judicial assignment decisive in determining the final pattern of resource distribution.

The authors of the two passages would be most likely to disagree over which one of the following assertions?