Ronald Coase

Ronald Coase.

Ronald Harry Coase (December 29, 1910September 2, 2013) was a British economist and the Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School.


  • The traditional approach has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?
    • R.H. Coase "The Problem of Social Cost." Journal of Law and Economics, Vol. 3. (Oct., 1960), pp. 1-44: About externality
  • In my youth it was said that what was too silly to be said may be sung. In modern economics it may be put into mathematics.
    • Ronald Coase (1988). The firm, the market and the law. Chicago London: The University of Chicago press: Ch. 6. A remark on "The problem of social cost", last sentence
  • I can't remember [of a good regulation]. Regulation of transport, regulation of agriculture—agriculture is a, zoning is z. You know, you go from a to z, they are all bad. There were so many studies, and the result was quite universal: The effects were bad.
  • If economists wished to study the horse, they wouldn't go and look at horses. They'd sit in their studies and say to themselves, "what would I do if I were a horse?"
    • R.H. Coase in speech to the "International Society of New Institutional Economics" the 17 September 1999, Washington DC. He claims he was quoting fellow economist Ely Devons which reportedly said this in a meeting

The Nature of the Firm (1937)Edit

Ronald Coase "The nature of the firm." Economica 4.16 (1937): 386-405.

  • Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market. Within a firm, these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-co-ordinator, who directs production.
    • p. 333
  • It is clear that these are alternative methods of co-ordinating production. Yet, having regard to the fact that, if production is regulated by price movements, production could be carried on without any organization at all might we ask, why is there any organization?
    • p. 388
  • A firm consist of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur... As a firm gets larger, there may be decreasing returns to the entrepreneur function, that is, the costs of organizing additional transactions within the firm may rise.
    • p. 388-9 as cited in: E. Wayne Nafziger (2012) Economic Development. p. 386

"How should economists choose?" (1981)Edit

R.H. Coase "How should economists choose?" Warren Nutter Lecture, 1981. Reprinted in Essays on Economics and Economists (1994/2012)

  • But a theory is not like an airline or bus timetable. We are not interested simply in the accuracy of its predictions. A theory also serves as a base for thinking. It helps us to understand what is going on by enabling us to organize our thoughts. Faced with a choice between a theory which predicts well but gives us little insight into how the system works and one which gives us this insight but predicts badly, I would choose the latter, and I am inclined to think that most economists would do the same.
    • p. 16-17
  • If you torture the data enough, nature will always confess.
    • p. 27.
    • Coase states that he said this in a talk at the University of Virginia in the early 1960s and that this saying, "in a somewhat altered form, has taken its place in the statistical literature."
      • Alternative: "If you torture the data long enough, it will confess."
        • Cited in: Gordon Tullock, "A Comment on Daniel Klein's 'A Plea to Economists Who Favor Liberty'", Eastern Economic Journal, Spring 2001.

Quotes about CoaseEdit

  • Writers after Coase have referred to the authority structure of the firm as a "visible hand" that works in combination with Smith's invisible hand. The everyday fact that employers exercise power over their employees — not news to most employees — had been a central theme in Marx's economics, but it was (and generally continues to be) overlooked by most neoclassical economists. Early in his studies Coase noted the similarity between the hierarchical organization of capitalist firms, with their reliance on command relations, and the then-existing system of centralized economic planning in the Communist countries, where production was carried out in accordance with orders from higher authorities and where market competition played little role.
    • Samuel Bowles, Richard Edwards, and Frank Roosevelt. Understanding Capitalism: Competition, Command, and Change (3rd ed., 2005), p. 85

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