Tossing a constraint out of the system and then not allowing the system to adjust is exactly how economists convinced themselves of inefficiency. They didn’t know about transaction costs but did realize that externalities shouldn’t exist in their absence, albeit not explicitly. They observed the reality of externalities and did not realize they were the result of the adjustment to the reality of transaction costs, so they concluded they were inefficient. Coase put that to rest in 1960.
It is necessary not to allow the system to adjust in order for it to be inefficient. In other words, it is necessary to not allow the system to obey the laws of economics.
Tossing a constraint out of the system and then not allowing the system to adjust is exactly how economists convinced themselves of inefficiency. They didn’t know about transaction costs but did realize that externalities shouldn’t exist in their absence, albeit not explicitly. They observed the reality of externalities and did not realize they were the result of the adjustment to the reality of transaction costs, so they concluded they were inefficient. Coase put that to rest in 1960.
It is necessary not to allow the system to adjust in order for it to be inefficient. In other words, it is necessary to not allow the system to obey the laws of economics.