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Ronald Coase

Ronald Harry Coase (/ˈks/; 29 December 1910 – 2 September 2013) was a British economist and author. Coase was educated at the London School of Economics, where he was a member of the faculty until 1951. He was the Clifton R. Musser Professor of Economics at the University of Chicago Law School, where he arrived in 1964 and remained for the rest of his life. He received the Nobel Memorial Prize in Economic Sciences in 1991.[2]

Ronald Coase
Born
Ronald Harry Coase

(1910-12-29)29 December 1910
Willesden, London, England
Died2 September 2013(2013-09-02) (aged 102)
Chicago, Illinois, U.S.
Resting placeGraceland Cemetery, Chicago
NationalityBritish[1]
EducationLondon School of Economics (BA)
University of Chicago
University of London (DSc)
Spouse
Marian Ruth Hartung
(m. 1937⁠–⁠2012)
9 children
Parents
  • Henry Joseph Coase (1884–1973) (father)
  • Rosalie Elizabeth Coase (née Giles; 1882–1972) (mother)
Academic career
InstitutionUniversity of Dundee
London School of Economics
University of Chicago
University of Virginia
University at Buffalo
FieldLaw and economics
School or
tradition
New institutional economics
Chicago School of Economics
ContributionsCoase theorem
Analysis of transaction costs
Coase conjecture
AwardsNobel Prize in Economics (1991)
Information at IDEAS / RePEc

Coase believed economists should study real-world wealth creation, in the manner of Adam Smith, stating, "It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy."[3] He believed economic study should reduce emphasis on Price Theory or theoretical markets and instead focus on real markets.[4][5] He established the case for the corporation as a means to pay the costs of operating a marketplace.[4] Coase is best known for two articles: "The Nature of the Firm" (1937), which introduces the concept of transaction costs to explain the nature and limits of firms; and "The Problem of Social Cost" (1960), which suggests that well-defined property rights could overcome the problems of externalities if it were not for transaction costs (see Coase theorem). Additionally, Coase's transaction costs approach has been influential in modern organizational economics, where it was re-introduced by Oliver E. Williamson.

Biography edit

 
Ronald Coase

Ronald Harry Coase was born in Willesden, a suburb of London, on 29 December 1910. His father, Henry Joseph Coase (1884–1973) was a telegraphist for the post office, as was his mother, Rosalie Elizabeth Coase (née Giles; 1882–1972), before marriage.[6][1][7] As a child, Coase had a weakness in his legs, for which he was required to wear leg-irons. Due to this problem, he attended the school for physical defectives. At the age of 12, he was able to enter Kilburn Grammar School on scholarship. At Kilburn, he studied for the intermediate examination of the University of London as an external student in 1927–29.[8][9]

Coase then continued his studies at the University of London, enrolling as an internal student of the London School of Economics, where he took courses with Arnold Plant[8] and received a Bachelor of Commerce degree in 1932. During his undergraduate studies, Coase received the Sir Ernest Cassel Travelling Scholarship which he used to visit the University of Chicago in 1931–1932 studying with Frank Knight and Jacob Viner. Coase's colleagues would later admit that they did not remember this first visit.[10] Between 1932 and 1934, Coase was an assistant lecturer at the Dundee School of Economics and Commerce, which later became part of the University of Dundee. Subsequently, Coase was an assistant lecturer in commerce at the University of Liverpool between 1934 and 1935 before returning to London School of Economics as a member of staff until 1951 in which year he was awarded an earned doctorate in economics from the University of London. He then started to work at the University at Buffalo and retained his British citizenship after moving to the United States in the 1950s.[11] In 1958, he moved to the University of Virginia. Coase settled at the University of Chicago in 1964 and became the co-editor of the Journal of Law and Economics with Aaron Director.[12] He was also for a time a trustee of the Philadelphia Society.[13] He received the Nobel Prize in Economics in 1991.

 
Coase's grave at Graceland Cemetery

Nearing his 100th birthday, Coase was working on a book concerning the rise of the economies of China and Vietnam.[14] In an interview, Coase explained the mission of the Coase China Society and his vision of economics and the part to be played by Chinese economists.[15][16] This became "How China Became Capitalist" (2012) co-authored with Ning Wang. Coase was honoured and received an honorary doctorate from the university at Buffalo Department of Economics in May 2012.[17]

Coase married Marian Ruth Hartung of Chicago, Illinois in Willesden, England, 7 August 1937.[1] Although they were unable to have children, they were married 75 years until her death on 17 October 2012, making him one of the longest-married Nobel Prize laureates.[5][18] Coase himself died in Chicago on 2 September 2013, at the age of 102.[19] Both are buried at Graceland Cemetery in Chicago.

He was praised across the political spectrum, with Slate calling him "one of the most distinguished economists in the world"[20] and Forbes calling him "the greatest of the many great University of Chicago economists".[21] The Washington Post called his work over eight decades "impossible to summarize" while recommending five of his papers to read.[22]

Contributions to economics edit

"The Nature of the Firm" edit

In "The Nature of the Firm" (1937), a brief but highly influential essay, Coase attempts to explain why the economy features a number of business firms instead of consisting exclusively of a multitude of independent, self-employed people who contract with one another. Given that "production could be carried on without any organization [that is, firms] at all", Coase asks, why and under what conditions should we expect firms to emerge?

Since modern firms can only emerge when an entrepreneur of some sort begins to hire people, Coase's analysis proceeds by considering the conditions under which it makes sense for an entrepreneur to seek hired help instead of contracting out for some particular task.

The traditional economic theory of the time (in the tradition of Adam Smith) suggested that, because the market is "efficient" (that is, those who are best at providing each good or service most cheaply are already doing so), it should always be cheaper to contract out than to hire.

Coase noted, however, a number of transaction costs involved in using the market; the cost of obtaining a good or service via the market actually exceeds the price of the good. Other costs, including search and information costs, bargaining costs, keeping trade secrets, and policing and enforcement costs, can all potentially add to the cost of procuring something from another party. This suggests that firms will arise which can internalise the production of goods and services required to deliver a product, thus avoiding these costs. This argument sets the stage for the later contributions by Oliver Williamson: markets and hierarchies are alternative co-ordination mechanisms for economic transactions. [23][24]

There is a natural limit to what a firm can produce internally, however. Coase notices "decreasing returns to the entrepreneur function", including increasing overhead costs and increasing propensity for an overwhelmed manager to make mistakes in resource allocation. These factors become countervailing costs to the use of the firm.

Coase argues that the size of a firm (as measured by how many contractual relations are "internal" to the firm and how many "external") is a result of finding an optimal balance between the competing tendencies of the costs outlined above. In general, making the firm larger will initially be advantageous, but the decreasing returns indicated above will eventually kick in, preventing the firm from growing indefinitely.

Other things being equal, therefore, a firm will tend to be larger:

  • the lower the costs of organising and the slower these costs rise with an increase in the number of transactions organised
  • the less likely the entrepreneur is to make mistakes and the smaller the increase in mistakes with an increase in the transactions organised
  • the greater the lowering (or the smaller the rise) in the supply price of factors of production to firms of larger size

The first two costs will increase with the spatial distribution of the transactions organised and the dissimilarity of the transactions. This explains why firms tend to either be in different geographic locations or to perform different functions. Additionally, technology changes that mitigate the cost of organising transactions across space may allow firms to become larger – the advent of the telephone and of cheap air travel, for example, would be expected to increase the size of firms.

A further exploration of the dichotomy between markets and hierarchies as co-ordination mechanisms for economic transactions derived a third alternative way called Commons based peer production, in which individuals successfully collaborate on large-scale projects following a diverse cluster of motivational drives and social signals.

"The Problem of Social Cost" edit

 
Coase at the University of Chicago Law School in 2003

Upon publishing his article The Federal Communications Commission in 1959, Coase received negative feedback from the faculty at the University of Chicago over his conclusions and apparent conflicts with A. C. Pigou. According to Coase, "What I said was thought to run counter to Pigou's analysis by a number of economists at the University of Chicago and was therefore, according to them, wrong. At a meeting in Chicago I was able to convince these economists that I was right and Pigou's analysis faulty." Coase had presented his paper in 1960 during a seminar in Chicago, to twenty senior economist including George Stigler and Milton Friedman. He gradually won over the usually skeptic audience, in what has later been considered a "paradigm-shifting moment" in the genesis of Chicago Law and Economics.[25] Coase would join the Chicago faculty four years later.

Published in the Journal of Law and Economics in 1960, while Coase was a member of the Economics department at the University of Virginia, "The Problem of Social Cost" provided the key insight that it is unclear where the blame for externalities lies. The example he gave was of a rancher whose cattle stray onto the cropland of his neighbour. If the rancher is made to restrict his cattle, he is harmed just as the farmer is if the cattle remain unrestrained.

Coase argued that without transaction costs the initial assignment of property rights makes no difference to whether or not the farmer and rancher can achieve the economically efficient outcome. If the cost of restraining cattle by, say, building a fence, is less than the cost of crop damage, the fence will be built. The initial assignment of property rights determines who builds the fence. If the farmer is responsible for the crop damage, the farmer will pay for the fence (as long the fence costs less than the crop damage). The allocation of property rights is primarily an equity issue, with consequences for the distribution of income and wealth, rather than an efficiency issue.

With sufficient transaction costs, initial property rights matter for both equity and efficiency. From the point of view of economic efficiency, property rights should be assigned such that the owner of the rights wants to take the economically efficient action. To elaborate, if it is efficient not to restrict the cattle, the rancher should be given the rights (so that cattle can move about freely), whereas if it is efficient to restrict the cattle, the farmer should be given the rights over the movement of the cattle (so the cattle are restricted).

This seminal argument forms the basis of the famous Coase theorem as labelled by Stigler. In 1990, Coase wrote that he feared "The Problem of Social Cost" had been widely misunderstood. [26]

Law and economics edit

 
Coase at the University of Chicago Law School

Though trained as an economist, Coase spent much of his career working in a law school. He is a central figure in the development of the subfield of law and economics. He viewed law and economics as having two parts, the first "using the economists' approach and concepts to analyze the working of the legal system, often called the economic analysis of the law"; and the second "a study of the influence of the legal system on the working of the economic system."[27] Coase said that the second part "is the part of law and economics in which I am most interested."

In his Simons Lecture celebrating the centennial of the University of Chicago, titled "Law and Economics at Chicago", Coase noted that he only accidentally wandered into the field:

It is generally agreed that this article has had an immense influence on legal scholarship, but this was no part of my intention. For me, "The Problem of Social Cost" was an essay in economics. It was aimed at economists. What I wanted to do was to improve our analysis of the working of the economic system. Law came into article because, in a regime of positive transaction costs, the character of the law becomes one of the main factors determining the performance of the economy. If transaction costs were zero (as is assumed in standard economic theory) we can imagine people contracting around the law whenever the value of production would be increased by a change in the legal position. But in a regime of positive transaction costs, such contracting would not occur whenever transaction costs were greater than the gain that such a redistribution of rights would bring. As a consequence the rights which individuals possess will commonly be those established by the law, which in these circumstances can be said to control the economy. As I have said, in "The Problem of Social Cost" I had no intention of making a contribution to legal scholarship. I referred to legal cases because they afforded examples of real situations as against the imaginary ones normally used by economists in their analysis. It was undoubtedly an economist who invented the widget. But in "The Problem of Social Cost" I did something else. I pointed out that the judges in their opinions often seemed to show a better understanding of the economic problem than did many economists even though their views were not always expressed in a very explicit fashion. I did this not to praise the judges but to shame economists.[28]

Despite wandering accidentally into law and economics, the opportunity to edit the Journal of Law and Economics was instrumental in bringing him to the University of Chicago:

[W]hen I was approached to fill Aaron Director's place on his retirement, what I found most attractive about coming to Chicago was the opportunity it gave me of editing the Journal. Indeed, it is probable that without the Journal I would not have come to Chicago. I knew nothing of the original aim of the Journal. What I wanted to do was to encourage the type of research which I had advocated in "The Problem of Social Cost," and I used my editorship of the Journal as a means of bringing this about.[28]

Coase believed that the University of Chicago was the intellectual center of law and economics. He concluded his Simons lecture by stating:

I am very much aware that, in concentrating in this lecture on law and economics at Chicago, I have neglected other significant contributions to the subject made elsewhere such as those by Guido Calabresi at Yale, by Donald Turner at Harvard, and by others. But it can hardly be denied that in the emergence of the subject of law and economics, Chicago has played a very significant part and one of which the University can be proud.[28]

Coase theorem edit

In law and economics, the Coase theorem (/ˈks/) describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem states that if trade in an externality is possible and there are sufficiently low transaction costs, bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property. In practice, obstacles to bargaining or poorly defined property rights can prevent Coasean bargaining. This 'theorem' is commonly attributed to Coase.

Coase conjecture edit

Another important contribution of Coase is the Coase conjecture, which is an informal argument that durable goods monopolists do not have market power because they are unable to commit to not lowering their prices in future periods.

Political views edit

When asked what he considered his politics to be, Coase stated,

I really don't know. I don't reject any policy without considering what its results are. If someone says there's going to be regulation, I don't say that regulation will be bad. Let's see. What we discover is that most regulation does produce, or has produced in recent times, a worse result. But I wouldn't like to say that all regulation would have this effect because one can think of circumstances in which it doesn't.[29]

Coase admitted that early in life, he aligned himself with socialism.

As a young man I was a Socialist. The first challenge to this belief came when, in 1931, 5 months before I took the final examinations for the B.Com. degree, I attended Arnold Plant's seminar at the London School of Economics (LSE). He introduced me to Adam Smith's invisible hand and to the advantages of a competitive system. He also pointed out that government schemes in the economic sphere were often ill-conceived and were introduced to placate special interests. I adopted many of Plant's positions but continued to regard myself as a Socialist. That this meant holding what could be considered, and were, inconsistent positions was not unusual at that time. Abba Lerner, a fellow student and a fine theorist, with whom I had a very friendly relation, also believed in the virtues of a competitive system but was even more attached to Socialism than I was.[27]

Guido Calabresi wrote that Coase's focus on transaction costs in The Nature of the Firm was the result of his socialist beliefs. Reflecting on this, Coase wrote: "It is very difficult to know where one's ideas come from but for all I know he may well be right." Coase continued:

My socialist sympathies gradually fell away and this process was accentuated as a result of being assigned in 1935 at LSE the course on the Economics of Public Utilities. I soon found out that very little was known about British public utilities and I set about making a series of historical studies on the water, gas, and electricity supply industries and of the Post Office and broadcasting. These researches taught me much about the public utility industries and they certainly made me aware of the defects of government operation of these industries, whether municipal or through nationalisation. These researches were interrupted by the war, when I joined the civil service, at first, for a short period, in the Forestry Commission, then responsible for timber production, and for the rest of the war, in the Central Statistical Office, one of the offices of the War Cabinet. This war-time experience did not significantly influence my views but I could not help noticing that, with the country in mortal danger and despite the leadership of Winston Churchill, government departments often seemed more concerned to defend their own interests than those of the country.[27]

Ronald Coase Institute edit

Coase was research advisor to the Ronald Coase Institute, an organisation that promotes research on institutions and organizations – the laws, rules, customs, and norms – that govern real economic systems, with particular support for young scholars from developing and transitional countries.

Coase-Sandor Institute for Law and Economics edit

 
Coase at a conference in 2008 with Richard Sandor

The University of Chicago Law School carries on the legacy of Ronald Coase through the mission of the Coase-Sandor Institute for Law and Economics. Each year, the University of Chicago Law School hosts the Coase Lecture, which was delivered in 2003 by Ronald Coase himself.[30]

Publications edit

  • Coase, R. H. (1937). "The Nature of the Firm". Economica. 4 (16): 386–405. doi:10.1111/j.1468-0335.1937.tb00002.x.
  • Coase, R. H. (1960). "The Problem of Social Cost". Journal of Law and Economics. 3 (1): 1–44. doi:10.1086/466560. S2CID 222331226.
  • Coase, R. H. (1972). "Durability and Monopoly". Journal of Law and Economics. 15 (1): 143–149. doi:10.1086/466731. S2CID 155011558.
  • Coase, R. H. (1974). "The Lighthouse in Economics". Journal of Law and Economics. 17 (2): 357–376. doi:10.1086/466796. S2CID 153715526.
  • Coase, R. H. (1992). "The Institutional Structure of Production". American Economic Review. 82 (4): 713–719. JSTOR 2117340. (Nobel Prize lecture)
  • Coase, R. H. (1988). The Firm the Market and the Law. Chicago: The University of Chicago Press. ISBN 0226111016.
  • Coase, R. H. (1994). Essays on Economics and Economists. Chicago: The University of Chicago Press. ISBN 0226111032.
  • Coase, Ronald (2000). "The Acquisition of Fisher Body By General Motors". The Journal of Law & Economics. 43 (1): 15–32. doi:10.1086/467446. JSTOR 10.1086/467446. S2CID 154712364 – via JSTOR.
  • Coase, Ronald (2006). "The Conduct of Economics: The Example of Fisher Body and General Motors". Journal of Economics & Management Strategy. 15 (2): 255–278. CiteSeerX 10.1.1.424.5083. doi:10.1111/j.1530-9134.2006.00100.x. S2CID 154100464.
  • Coase, Ronald; Wang, Ning (2011). "The Industrial Structure of Production: A Research Agenda for Innovation in an Entrepreneurial Economy". Entrepreneurship Research Journal. 2 (1). doi:10.2202/2157-5665.1026. S2CID 154727631.
  • Coase, Ronald; Ning Wang (2012). How China Became Capitalist. Palgrave Macmillan. ISBN 978-1137019363..

See also edit

References edit

  1. ^ a b c "COASE, Ronald Harry". The International Who's Who (70th ed.). London & New York: Routledge. 2006. p. 406. ISBN 1-85743-366-1. Retrieved 16 July 2023.
  2. ^ Hahn, Robert (2013). "Ronald Harry Coase (1910–2013) Nobel-prize winning economist whose work inspired cap-and-trade". Nature. 502 (7472): 449. Bibcode:2013Natur.502..449H. doi:10.1038/502449a. PMID 24153291.
  3. ^ Coase, Ronald (1 December 2012). "Saving Economics from the Economists". Harvard Business Review. ISSN 0017-8012. Retrieved 21 January 2022.
  4. ^ a b Henderson, David R. (3 September 2013). "The Man Who Resisted 'Blackboard Economics'". The Wall Street Journal. ISSN 0099-9660. Retrieved 25 December 2019.
  5. ^ a b Littlewood, Mark (4 September 2013). "Ronald Coase obituary". The Guardian. Retrieved 9 September 2018.
  6. ^ "Coase, Ronald Harry". Who's Who in America 2000, Millennium Edition. Vol. I (A-K) (54th ed.). New Providence, NJ: Marquis Who's Who. 1999. p. 891. ISBN 0-8379-0200-2. Retrieved 16 July 2023 – via Internet Archive.
  7. ^ "COASE, Prof. Ronald Harry". Who's Who 2007: An Annual Biographical Dictionary (159 ed.). London: A & C Black. 2007. p. 447. ISBN 978-0-7136-7526-9. Retrieved 16 July 2023 – via Internet Archive.
  8. ^ a b "Ronald Coase. "Nobel Prize Autobiography," 1991".
  9. ^ Breit, William and Barry T. Hirsch. Lives of the Laureates, 4th ed. Cambridge, Mass: The MIT Press, 2004.
  10. ^ Kitch, Edmund W. (1983). "The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970". Journal of Law and Economics. 26 (1): 163–234. doi:10.1086/467030. JSTOR 725189. S2CID 153525815.
  11. ^ . Archived from the original on 28 February 2020. Retrieved 17 March 2011.
  12. ^ "Aaron Director, Founder of the field of Law and Economics". www-news.uchicago.edu. Retrieved 7 September 2019.
  13. ^ . Phillysoc.org. Archived from the original on 27 August 2013. Retrieved 3 September 2013.
  14. ^ . VietNamNet Bridge. 24 March 2010. Archived from the original on 3 September 2010.
  15. ^ "Coase China Society Interviews Ronald Coase". Chicago University Law School. 3 January 2011.
  16. ^ . Unirule Institute of Economics. 3 January 2011. Archived from the original on 17 January 2011.
  17. ^ http://economics.buffalo.edu/ Robert Coase Honorary Doctorate
  18. ^ Lyons, Patrick J. (3 September 2013). "Ronald H. Coase, a Law Professor And Leading Economist, Dies at 102". The New York Times.
  19. ^ Galer, Sarah. . Law.uchicago.edu. University of Chicago Law School. Archived from the original on 5 September 2013. Retrieved 3 September 2013.
  20. ^ Yglesias, Matthew (3 September 2013). "Ronald Coase, the Economist Who Explained Why We Have Companies". Slate.
  21. ^ Smith, Fred (3 September 2013). "Ronald Coase Was The Greatest of the Many Great University of Chicago Economists". Forbes.
  22. ^ Matthews, Dylan (3 September 2013). "Ronald Coase is dead. Here are five of his papers you need to read". The Washington Post.
  23. ^ Hein Schreuder, "Coase, Hayek and Hierarchy", In: S. Lindenberg & Hein Schreuder, editors, Interdisciplinary Perspectives on Organization Studies, Pergamon Press
  24. ^ Knight, Jack (1992). Institutions and Social Conflict. Cambridge University Press. p. 12. ISBN 978-0-521-42189-8.
  25. ^ Davies, William (2014). The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition. Sage. pp. 87–90. ISBN 978-1473905337.
  26. ^ The Problem of Social Cost University of Chicago Law School
  27. ^ a b c Coase, R. H. (1996). "Law and Economics and A.W. Brian Simpson". Journal of Legal Studies. 25 (1): 103–119. doi:10.1086/467973. JSTOR 724523. S2CID 146511123.
  28. ^ a b c Coase, R. H. (1993). "Law and Economics at Chicago". Journal of Law and Economics. 36 (1): 239–254. doi:10.1086/467274. JSTOR 725475. S2CID 153402423.
  29. ^ "Looking for results". Reason magazine. January 1997.
  30. ^ Coase, 2003 Coase Lecture: Ronald; Present, "The; Law, Future of; Economics" (6 July 2009). "2003 Coase Lecture: Ronald Coase, "The Present and Future of Law and Economics" | University of Chicago Law School". www.law.uchicago.edu. Retrieved 22 December 2023.{{cite web}}: CS1 maint: numeric names: authors list (link)

Bibliography edit

https://www.researchgate.net/publication/374337555_Ronald_Coase_in_the_French_Wikipedia

External links edit

  • A video of Coase talking about law and economics
  • Ronald Coase on Nobelprize.org  
  • Ronald H. Coase (1910–2013). Library of Economics and Liberty (2nd ed.). Liberty Fund. 2008. {{cite book}}: |work= ignored (help)
  • Wireless Communications and Computing at a Crossroads, Journal on Telecommunications & High Technology Law, Vol. 3, No. 2. pp. 205, 239
  • Coase Institute
  • "Looking for Results", interview in Reason by Thomas W. Hazlett
  • 2003 Coase Centennial Speech delivered by Coase (500MB QuickTime video file)
  • "Why do Firms Exist?", Schumpeter, The Economist, 2010.
  • Russ Roberts's "Coase on Externalities, the Firm, and the State of Economics" from the Library of Economics and Liberty
  • No Cheap Victories – Last Interview and Tribute
  • Ronald Coase and the Misuse of Economics by John Cassidy, The New Yorker, 2013
  • Ronald Coase publications indexed by Google Scholar
  • Ronald Coase at Find a Grave  
  • Works by or about Ronald Coase at Internet Archive
  • Guide to the Ronald H. Coase Papers 1805–2013 at the University of Chicago Special Collections Research Center

ronald, coase, ronald, harry, coase, december, 1910, september, 2013, british, economist, author, coase, educated, london, school, economics, where, member, faculty, until, 1951, clifton, musser, professor, economics, university, chicago, school, where, arrive. Ronald Harry Coase ˈ k oʊ s 29 December 1910 2 September 2013 was a British economist and author Coase was educated at the London School of Economics where he was a member of the faculty until 1951 He was the Clifton R Musser Professor of Economics at the University of Chicago Law School where he arrived in 1964 and remained for the rest of his life He received the Nobel Memorial Prize in Economic Sciences in 1991 2 Ronald CoaseBornRonald Harry Coase 1910 12 29 29 December 1910Willesden London EnglandDied2 September 2013 2013 09 02 aged 102 Chicago Illinois U S Resting placeGraceland Cemetery ChicagoNationalityBritish 1 EducationLondon School of Economics BA University of ChicagoUniversity of London DSc SpouseMarian Ruth Hartung m 1937 2012 wbr 9 childrenParentsHenry Joseph Coase 1884 1973 father Rosalie Elizabeth Coase nee Giles 1882 1972 mother Academic careerInstitutionUniversity of DundeeLondon School of EconomicsUniversity of ChicagoUniversity of VirginiaUniversity at BuffaloFieldLaw and economicsSchool ortraditionNew institutional economicsChicago School of EconomicsContributionsCoase theoremAnalysis of transaction costsCoase conjectureAwardsNobel Prize in Economics 1991 Information at IDEAS RePEc Coase believed economists should study real world wealth creation in the manner of Adam Smith stating It is suicidal for the field to slide into a hard science of choice ignoring the influences of society history culture and politics on the working of the economy 3 He believed economic study should reduce emphasis on Price Theory or theoretical markets and instead focus on real markets 4 5 He established the case for the corporation as a means to pay the costs of operating a marketplace 4 Coase is best known for two articles The Nature of the Firm 1937 which introduces the concept of transaction costs to explain the nature and limits of firms and The Problem of Social Cost 1960 which suggests that well defined property rights could overcome the problems of externalities if it were not for transaction costs see Coase theorem Additionally Coase s transaction costs approach has been influential in modern organizational economics where it was re introduced by Oliver E Williamson Contents 1 Biography 2 Contributions to economics 2 1 The Nature of the Firm 2 2 The Problem of Social Cost 2 3 Law and economics 2 4 Coase theorem 2 5 Coase conjecture 3 Political views 4 Ronald Coase Institute 5 Coase Sandor Institute for Law and Economics 6 Publications 7 See also 8 References 8 1 Bibliography 9 External linksBiography edit nbsp Ronald CoaseRonald Harry Coase was born in Willesden a suburb of London on 29 December 1910 His father Henry Joseph Coase 1884 1973 was a telegraphist for the post office as was his mother Rosalie Elizabeth Coase nee Giles 1882 1972 before marriage 6 1 7 As a child Coase had a weakness in his legs for which he was required to wear leg irons Due to this problem he attended the school for physical defectives At the age of 12 he was able to enter Kilburn Grammar School on scholarship At Kilburn he studied for the intermediate examination of the University of London as an external student in 1927 29 8 9 Coase then continued his studies at the University of London enrolling as an internal student of the London School of Economics where he took courses with Arnold Plant 8 and received a Bachelor of Commerce degree in 1932 During his undergraduate studies Coase received the Sir Ernest Cassel Travelling Scholarship which he used to visit the University of Chicago in 1931 1932 studying with Frank Knight and Jacob Viner Coase s colleagues would later admit that they did not remember this first visit 10 Between 1932 and 1934 Coase was an assistant lecturer at the Dundee School of Economics and Commerce which later became part of the University of Dundee Subsequently Coase was an assistant lecturer in commerce at the University of Liverpool between 1934 and 1935 before returning to London School of Economics as a member of staff until 1951 in which year he was awarded an earned doctorate in economics from the University of London He then started to work at the University at Buffalo and retained his British citizenship after moving to the United States in the 1950s 11 In 1958 he moved to the University of Virginia Coase settled at the University of Chicago in 1964 and became the co editor of the Journal of Law and Economics with Aaron Director 12 He was also for a time a trustee of the Philadelphia Society 13 He received the Nobel Prize in Economics in 1991 nbsp Coase s grave at Graceland CemeteryNearing his 100th birthday Coase was working on a book concerning the rise of the economies of China and Vietnam 14 In an interview Coase explained the mission of the Coase China Society and his vision of economics and the part to be played by Chinese economists 15 16 This became How China Became Capitalist 2012 co authored with Ning Wang Coase was honoured and received an honorary doctorate from the university at Buffalo Department of Economics in May 2012 17 Coase married Marian Ruth Hartung of Chicago Illinois in Willesden England 7 August 1937 1 Although they were unable to have children they were married 75 years until her death on 17 October 2012 making him one of the longest married Nobel Prize laureates 5 18 Coase himself died in Chicago on 2 September 2013 at the age of 102 19 Both are buried at Graceland Cemetery in Chicago He was praised across the political spectrum with Slate calling him one of the most distinguished economists in the world 20 and Forbes calling him the greatest of the many great University of Chicago economists 21 The Washington Post called his work over eight decades impossible to summarize while recommending five of his papers to read 22 Contributions to economics edit The Nature of the Firm edit Main article The Nature of the Firm In The Nature of the Firm 1937 a brief but highly influential essay Coase attempts to explain why the economy features a number of business firms instead of consisting exclusively of a multitude of independent self employed people who contract with one another Given that production could be carried on without any organization that is firms at all Coase asks why and under what conditions should we expect firms to emerge Since modern firms can only emerge when an entrepreneur of some sort begins to hire people Coase s analysis proceeds by considering the conditions under which it makes sense for an entrepreneur to seek hired help instead of contracting out for some particular task The traditional economic theory of the time in the tradition of Adam Smith suggested that because the market is efficient that is those who are best at providing each good or service most cheaply are already doing so it should always be cheaper to contract out than to hire Coase noted however a number of transaction costs involved in using the market the cost of obtaining a good or service via the market actually exceeds the price of the good Other costs including search and information costs bargaining costs keeping trade secrets and policing and enforcement costs can all potentially add to the cost of procuring something from another party This suggests that firms will arise which can internalise the production of goods and services required to deliver a product thus avoiding these costs This argument sets the stage for the later contributions by Oliver Williamson markets and hierarchies are alternative co ordination mechanisms for economic transactions 23 24 There is a natural limit to what a firm can produce internally however Coase notices decreasing returns to the entrepreneur function including increasing overhead costs and increasing propensity for an overwhelmed manager to make mistakes in resource allocation These factors become countervailing costs to the use of the firm Coase argues that the size of a firm as measured by how many contractual relations are internal to the firm and how many external is a result of finding an optimal balance between the competing tendencies of the costs outlined above In general making the firm larger will initially be advantageous but the decreasing returns indicated above will eventually kick in preventing the firm from growing indefinitely Other things being equal therefore a firm will tend to be larger the lower the costs of organising and the slower these costs rise with an increase in the number of transactions organised the less likely the entrepreneur is to make mistakes and the smaller the increase in mistakes with an increase in the transactions organised the greater the lowering or the smaller the rise in the supply price of factors of production to firms of larger sizeThe first two costs will increase with the spatial distribution of the transactions organised and the dissimilarity of the transactions This explains why firms tend to either be in different geographic locations or to perform different functions Additionally technology changes that mitigate the cost of organising transactions across space may allow firms to become larger the advent of the telephone and of cheap air travel for example would be expected to increase the size of firms A further exploration of the dichotomy between markets and hierarchies as co ordination mechanisms for economic transactions derived a third alternative way called Commons based peer production in which individuals successfully collaborate on large scale projects following a diverse cluster of motivational drives and social signals The Problem of Social Cost edit Main article The Problem of Social Cost nbsp Coase at the University of Chicago Law School in 2003Upon publishing his article The Federal Communications Commission in 1959 Coase received negative feedback from the faculty at the University of Chicago over his conclusions and apparent conflicts with A C Pigou According to Coase What I said was thought to run counter to Pigou s analysis by a number of economists at the University of Chicago and was therefore according to them wrong At a meeting in Chicago I was able to convince these economists that I was right and Pigou s analysis faulty Coase had presented his paper in 1960 during a seminar in Chicago to twenty senior economist including George Stigler and Milton Friedman He gradually won over the usually skeptic audience in what has later been considered a paradigm shifting moment in the genesis of Chicago Law and Economics 25 Coase would join the Chicago faculty four years later Published in the Journal of Law and Economics in 1960 while Coase was a member of the Economics department at the University of Virginia The Problem of Social Cost provided the key insight that it is unclear where the blame for externalities lies The example he gave was of a rancher whose cattle stray onto the cropland of his neighbour If the rancher is made to restrict his cattle he is harmed just as the farmer is if the cattle remain unrestrained Coase argued that without transaction costs the initial assignment of property rights makes no difference to whether or not the farmer and rancher can achieve the economically efficient outcome If the cost of restraining cattle by say building a fence is less than the cost of crop damage the fence will be built The initial assignment of property rights determines who builds the fence If the farmer is responsible for the crop damage the farmer will pay for the fence as long the fence costs less than the crop damage The allocation of property rights is primarily an equity issue with consequences for the distribution of income and wealth rather than an efficiency issue With sufficient transaction costs initial property rights matter for both equity and efficiency From the point of view of economic efficiency property rights should be assigned such that the owner of the rights wants to take the economically efficient action To elaborate if it is efficient not to restrict the cattle the rancher should be given the rights so that cattle can move about freely whereas if it is efficient to restrict the cattle the farmer should be given the rights over the movement of the cattle so the cattle are restricted This seminal argument forms the basis of the famous Coase theorem as labelled by Stigler In 1990 Coase wrote that he feared The Problem of Social Cost had been widely misunderstood 26 Law and economics edit nbsp Coase at the University of Chicago Law SchoolThough trained as an economist Coase spent much of his career working in a law school He is a central figure in the development of the subfield of law and economics He viewed law and economics as having two parts the first using the economists approach and concepts to analyze the working of the legal system often called the economic analysis of the law and the second a study of the influence of the legal system on the working of the economic system 27 Coase said that the second part is the part of law and economics in which I am most interested In his Simons Lecture celebrating the centennial of the University of Chicago titled Law and Economics at Chicago Coase noted that he only accidentally wandered into the field It is generally agreed that this article has had an immense influence on legal scholarship but this was no part of my intention For me The Problem of Social Cost was an essay in economics It was aimed at economists What I wanted to do was to improve our analysis of the working of the economic system Law came into article because in a regime of positive transaction costs the character of the law becomes one of the main factors determining the performance of the economy If transaction costs were zero as is assumed in standard economic theory we can imagine people contracting around the law whenever the value of production would be increased by a change in the legal position But in a regime of positive transaction costs such contracting would not occur whenever transaction costs were greater than the gain that such a redistribution of rights would bring As a consequence the rights which individuals possess will commonly be those established by the law which in these circumstances can be said to control the economy As I have said in The Problem of Social Cost I had no intention of making a contribution to legal scholarship I referred to legal cases because they afforded examples of real situations as against the imaginary ones normally used by economists in their analysis It was undoubtedly an economist who invented the widget But in The Problem of Social Cost I did something else I pointed out that the judges in their opinions often seemed to show a better understanding of the economic problem than did many economists even though their views were not always expressed in a very explicit fashion I did this not to praise the judges but to shame economists 28 Despite wandering accidentally into law and economics the opportunity to edit the Journal of Law and Economics was instrumental in bringing him to the University of Chicago W hen I was approached to fill Aaron Director s place on his retirement what I found most attractive about coming to Chicago was the opportunity it gave me of editing the Journal Indeed it is probable that without the Journal I would not have come to Chicago I knew nothing of the original aim of the Journal What I wanted to do was to encourage the type of research which I had advocated in The Problem of Social Cost and I used my editorship of the Journal as a means of bringing this about 28 Coase believed that the University of Chicago was the intellectual center of law and economics He concluded his Simons lecture by stating I am very much aware that in concentrating in this lecture on law and economics at Chicago I have neglected other significant contributions to the subject made elsewhere such as those by Guido Calabresi at Yale by Donald Turner at Harvard and by others But it can hardly be denied that in the emergence of the subject of law and economics Chicago has played a very significant part and one of which the University can be proud 28 Coase theorem edit In law and economics the Coase theorem ˈ k oʊ s describes the economic efficiency of an economic allocation or outcome in the presence of externalities The theorem states that if trade in an externality is possible and there are sufficiently low transaction costs bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property In practice obstacles to bargaining or poorly defined property rights can prevent Coasean bargaining This theorem is commonly attributed to Coase Coase conjecture edit Another important contribution of Coase is the Coase conjecture which is an informal argument that durable goods monopolists do not have market power because they are unable to commit to not lowering their prices in future periods Political views editWhen asked what he considered his politics to be Coase stated I really don t know I don t reject any policy without considering what its results are If someone says there s going to be regulation I don t say that regulation will be bad Let s see What we discover is that most regulation does produce or has produced in recent times a worse result But I wouldn t like to say that all regulation would have this effect because one can think of circumstances in which it doesn t 29 Coase admitted that early in life he aligned himself with socialism As a young man I was a Socialist The first challenge to this belief came when in 1931 5 months before I took the final examinations for the B Com degree I attended Arnold Plant s seminar at the London School of Economics LSE He introduced me to Adam Smith s invisible hand and to the advantages of a competitive system He also pointed out that government schemes in the economic sphere were often ill conceived and were introduced to placate special interests I adopted many of Plant s positions but continued to regard myself as a Socialist That this meant holding what could be considered and were inconsistent positions was not unusual at that time Abba Lerner a fellow student and a fine theorist with whom I had a very friendly relation also believed in the virtues of a competitive system but was even more attached to Socialism than I was 27 Guido Calabresi wrote that Coase s focus on transaction costs in The Nature of the Firm was the result of his socialist beliefs Reflecting on this Coase wrote It is very difficult to know where one s ideas come from but for all I know he may well be right Coase continued My socialist sympathies gradually fell away and this process was accentuated as a result of being assigned in 1935 at LSE the course on the Economics of Public Utilities I soon found out that very little was known about British public utilities and I set about making a series of historical studies on the water gas and electricity supply industries and of the Post Office and broadcasting These researches taught me much about the public utility industries and they certainly made me aware of the defects of government operation of these industries whether municipal or through nationalisation These researches were interrupted by the war when I joined the civil service at first for a short period in the Forestry Commission then responsible for timber production and for the rest of the war in the Central Statistical Office one of the offices of the War Cabinet This war time experience did not significantly influence my views but I could not help noticing that with the country in mortal danger and despite the leadership of Winston Churchill government departments often seemed more concerned to defend their own interests than those of the country 27 Ronald Coase Institute editCoase was research advisor to the Ronald Coase Institute an organisation that promotes research on institutions and organizations the laws rules customs and norms that govern real economic systems with particular support for young scholars from developing and transitional countries Coase Sandor Institute for Law and Economics edit nbsp Coase at a conference in 2008 with Richard SandorThe University of Chicago Law School carries on the legacy of Ronald Coase through the mission of the Coase Sandor Institute for Law and Economics Each year the University of Chicago Law School hosts the Coase Lecture which was delivered in 2003 by Ronald Coase himself 30 Publications editCoase R H 1937 The Nature of the Firm Economica 4 16 386 405 doi 10 1111 j 1468 0335 1937 tb00002 x Coase R H 1960 The Problem of Social Cost Journal of Law and Economics 3 1 1 44 doi 10 1086 466560 S2CID 222331226 Coase R H 1972 Durability and Monopoly Journal of Law and Economics 15 1 143 149 doi 10 1086 466731 S2CID 155011558 Coase R H 1974 The Lighthouse in Economics Journal of Law and Economics 17 2 357 376 doi 10 1086 466796 S2CID 153715526 Coase R H 1992 The Institutional Structure of Production American Economic Review 82 4 713 719 JSTOR 2117340 Nobel Prize lecture Coase R H 1988 The Firm the Market and the Law Chicago The University of Chicago Press ISBN 0226111016 Coase R H 1994 Essays on Economics and Economists Chicago The University of Chicago Press ISBN 0226111032 Coase Ronald 2000 The Acquisition of Fisher Body By General Motors The Journal of Law amp Economics 43 1 15 32 doi 10 1086 467446 JSTOR 10 1086 467446 S2CID 154712364 via JSTOR Coase Ronald 2006 The Conduct of Economics The Example of Fisher Body and General Motors Journal of Economics amp Management Strategy 15 2 255 278 CiteSeerX 10 1 1 424 5083 doi 10 1111 j 1530 9134 2006 00100 x S2CID 154100464 Coase Ronald Wang Ning 2011 The Industrial Structure of Production A Research Agenda for Innovation in an Entrepreneurial Economy Entrepreneurship Research Journal 2 1 doi 10 2202 2157 5665 1026 S2CID 154727631 Coase Ronald Ning Wang 2012 How China Became Capitalist Palgrave Macmillan ISBN 978 1137019363 See also edit nbsp Conservatism portal nbsp Economics portal nbsp Libertarianism portal nbsp Politics portalGovernment failure Horizontal integration List of think tanks Vertical integrationReferences edit a b c COASE Ronald Harry The International Who s Who 70th ed London amp New York Routledge 2006 p 406 ISBN 1 85743 366 1 Retrieved 16 July 2023 Hahn Robert 2013 Ronald Harry Coase 1910 2013 Nobel prize winning economist whose work inspired cap and trade Nature 502 7472 449 Bibcode 2013Natur 502 449H doi 10 1038 502449a PMID 24153291 Coase Ronald 1 December 2012 Saving Economics from the Economists Harvard Business Review ISSN 0017 8012 Retrieved 21 January 2022 a b Henderson David R 3 September 2013 The Man Who Resisted Blackboard Economics The Wall Street Journal ISSN 0099 9660 Retrieved 25 December 2019 a b Littlewood Mark 4 September 2013 Ronald Coase obituary The Guardian Retrieved 9 September 2018 Coase Ronald Harry Who s Who in America 2000 Millennium Edition Vol I A K 54th ed New Providence NJ Marquis Who s Who 1999 p 891 ISBN 0 8379 0200 2 Retrieved 16 July 2023 via Internet Archive COASE Prof Ronald Harry Who s Who 2007 An Annual Biographical Dictionary 159 ed London A amp C Black 2007 p 447 ISBN 978 0 7136 7526 9 Retrieved 16 July 2023 via Internet Archive a b Ronald Coase Nobel Prize Autobiography 1991 Breit William and Barry T Hirsch Lives of the Laureates 4th ed Cambridge Mass The MIT Press 2004 Kitch Edmund W 1983 The Fire of Truth A Remembrance of Law and Economics at Chicago 1932 1970 Journal of Law and Economics 26 1 163 234 doi 10 1086 467030 JSTOR 725189 S2CID 153525815 U of Chicago Professor Wins Nobel Economics Prize Archived from the original on 28 February 2020 Retrieved 17 March 2011 Aaron Director Founder of the field of Law and Economics www news uchicago edu Retrieved 7 September 2019 Trustees Phillysoc org Archived from the original on 27 August 2013 Retrieved 3 September 2013 99 year old economist researches the rise of China and Vietnam VietNamNet Bridge 24 March 2010 Archived from the original on 3 September 2010 Coase China Society Interviews Ronald Coase Chicago University Law School 3 January 2011 Interview with Professor Ronald Coase Unirule Institute of Economics 3 January 2011 Archived from the original on 17 January 2011 http economics buffalo edu Robert Coase Honorary Doctorate Lyons Patrick J 3 September 2013 Ronald H Coase a Law Professor And Leading Economist Dies at 102 The New York Times Galer Sarah Ronald H Coase Founding Scholar in Law and Economics 1910 2013 Law uchicago edu University of Chicago Law School Archived from the original on 5 September 2013 Retrieved 3 September 2013 Yglesias Matthew 3 September 2013 Ronald Coase the Economist Who Explained Why We Have Companies Slate Smith Fred 3 September 2013 Ronald Coase Was The Greatest of the Many Great University of Chicago Economists Forbes Matthews Dylan 3 September 2013 Ronald Coase is dead Here are five of his papers you need to read The Washington Post Hein Schreuder Coase Hayek and Hierarchy In S Lindenberg amp Hein Schreuder editors Interdisciplinary Perspectives on Organization Studies Pergamon Press Knight Jack 1992 Institutions and Social Conflict Cambridge University Press p 12 ISBN 978 0 521 42189 8 Davies William 2014 The Limits of Neoliberalism Authority Sovereignty and the Logic of Competition Sage pp 87 90 ISBN 978 1473905337 The Problem of Social Cost University of Chicago Law School a b c Coase R H 1996 Law and Economics and A W Brian Simpson Journal of Legal Studies 25 1 103 119 doi 10 1086 467973 JSTOR 724523 S2CID 146511123 a b c Coase R H 1993 Law and Economics at Chicago Journal of Law and Economics 36 1 239 254 doi 10 1086 467274 JSTOR 725475 S2CID 153402423 Looking for results Reason magazine January 1997 Coase 2003 Coase Lecture Ronald Present The Law Future of Economics 6 July 2009 2003 Coase Lecture Ronald Coase The Present and Future of Law and Economics University of Chicago Law School www law uchicago edu Retrieved 22 December 2023 a href Template Cite web html title Template Cite web cite web a CS1 maint numeric names authors list link Bibliography edit MacKenzie Douglas 2008 Coase Ronald H 1910 In Hamowy Ronald ed The Encyclopedia of Libertarianism Thousand Oaks CA Sage Cato Institute pp 73 74 doi 10 4135 9781412965811 n48 ISBN 978 1412965804 LCCN 2008009151 OCLC 750831024 https www researchgate net publication 374337555 Ronald Coase in the French WikipediaExternal links edit nbsp Wikiquote has quotations related to Ronald Coase A video of Coase talking about law and economics Ronald Coase on Nobelprize org nbsp Ronald H Coase 1910 2013 Library of Economics and Liberty 2nd ed Liberty Fund 2008 a href Template Cite book html title Template Cite book cite book a work ignored help Wireless Communications and Computing at a Crossroads Journal on Telecommunications amp High Technology Law Vol 3 No 2 pp 205 239 Coase Institute Looking for Results interview in Reason by Thomas W Hazlett 2003 Coase Centennial Speech delivered by Coase 500MB QuickTime video file Why do Firms Exist Schumpeter The Economist 2010 Russ Roberts s Coase on Externalities the Firm and the State of Economics from the Library of Economics and Liberty No Cheap Victories Last Interview and Tribute Ronald Coase and the Misuse of Economics by John Cassidy The New Yorker 2013 Ronald Coase publications indexed by Google Scholar Ronald Coase at Find a Grave nbsp Works by or about Ronald Coase at Internet Archive Guide to the Ronald H Coase Papers 1805 2013 at the University of Chicago Special Collections Research CenterAwardsPreceded byHarry M MarkowitzMerton H MillerWilliam F Sharpe Laureate of the Nobel Memorial Prize in Economics1991 Succeeded byGary S Becker Retrieved from https en wikipedia org w index php title Ronald Coase amp oldid 1207168916, wikipedia, wiki, book, books, library,

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