September 3, 2013

In Memory of Ronald Coase (1910-2013)

Peter J. Boettke

Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics

Adam Thierer

Senior Research Fellow

John Nye

Frederic Bastiat Chair in Political Economy, Mercatus Center

Alexander Tabarrok

Bartley J. Madden Chair in Economics, Mercatus Center at George Mason University
Summary

With great sadness, we relay news that economist Ronald Coase passed away on September 2, 2013, at the age of 102.

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With great sadness, we relay news that economist Ronald Coase passed away on September 2, 2013, at the age of 102.

Coase made significant contributions to the study of economics, including the development of the Coase Theorem, his work on spectrum allocation, and his two most influential essays “The Nature of the Firm” (1937) and “The Problem of Social Cost” (1960). He was awarded the Nobel Prize in economics in 1991 for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.

In a recent CafeHayek post, Mercatus senior fellow Don Boudreaux describes him as one of history’s greatest economists. Peter Boettke discusses his work at Coordination Problem, where he observes:

“Ronald Coase was a masterful economist. His work represents the approach to political economy that was pioneered at London School of Economics and developed into the Virginia School of Political Economy. He was a champion of basic economic reasoning pursued persistently and consistently and for an appreciation of real-world institutional diversity and its implications. His work inspired economists throughout the world. The textbook which I am affiliated with, The Economic Way of Thinking, was a by-product of the Coasean influence at the University of Washington, where Paul Heyne taught and where research on Coasean bargins emerged in the writings of Steven Cheung, Yoram Barzel, Robert Higgs, and Douglass North and in a variety of historical/institutional settings. This influence—along with the UCLA, Virginia, and Austrian influences—still leave a significant mark on the presentation.” 

Boettke wrote about Coase’s article on the FCC in more detail on the occasion of Coase’s 99th birthday. Read more about Coase in chapters 9–11 of the new edition of The Economic Way of Thinking.

In 1997, Mercatus Frederic Bastiat Chair in Political Economy John Nye interviewed Coase at the Inaugural Conference for the International Society for New Institutional Economics. He discusses his work as the founder of the Society for New Institutional Economics and his hopes for the future of economic research. Here is an exchange from that interview:

Nye: “It sounds like you’re an adherent of really traditional price theory in the tradition that goes back to Adam Smith and perhaps the old Chicago school as opposed to the new one. What you’re suggesting is that we return to our roots as joint interest in price theory and the institutions of market economies, jointly?”

Coase: “Yes. The point I’m going to make when I talk in the meeting is that economists boast that Darwin got his ideas from Malthus and Adam Smith. Well, to me, what is interesting is to see what has happened since Darwin in biology and what has happened to economics since Adam Smith. The differences are startling. They really understand how biological processes work in a way that we do not understand how economic processes work.”

The Coase Theorem was first presented in his 1959 work on the FCC and allocating radio spectrum. In an essay for The American, Jeffrey Eisenach and Adam Thierer discuss Coase's impact on the FCC:

In the process of explaining why government should not own and control the broadcast spectrum, he showed that where Progressives mistakenly had diagnosed market failure, the real problem was government’s failure to create enforceable property rights. And, where Progressives had promoted government control, Coase minced no words in demonstrating its failings. His work—expanded upon a year later in “The Problem of Social Cost”2 —ultimately won him the 1991 Nobel Prize in Economics, “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.

He argued that with well-defined property rights, spectrum could be allocated in a market just like other goods. In this MRUniversity video, Alex Tabarrok explains his ideas on spectrum allocation in more detail. 

To learn about Ronald Coase and his work, visit the Library of Economics and Liberty.