RIP Ronald Coase

Extremely sad news that Ronald Coase passed on today.  His work on economics had a profound impact upon the discipline, and significantly added to the way economists think about the allocation of scarce resources – so economics itself.  There are few people who have had this sort of impact.  While I was going to write a couple of things about his work, I found that A Fine Theorem covered this off a much more satisfactory way than I could:

Sad news today that Ronald Coase has passed away; he was still working, often on the Chinese economy, at the incredible age of 102. Coase is best known to economists for two statements: that transaction costs explain many puzzles in the organization of society, and that pricing for durable goods presents a particular worry since even a monopolist selling a durable good needs to “compete” with its future and past selves. Both of these statements are horribly, horribly misunderstood, particularly the first.

I would suggest reading the whole post.  These are two ideas that were an important part of my economics study, however there were links to the literature in there that I had not seen before and that helped breath further life into these ideas for me.

Paul Walker also pays his respects here.  While for some story telling about interpreting the Coase theorem this McCloskey piece is golden.

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  1. […] A world of economics has lost the greatest economist of the 20th century. The death of Ronald Harry Coase has deprived the economists profession of one of its creative and innovative thinkers. His introduction of transaction costs into economics gave rise to the modern theory of the firm, law and economics and the new institutional economics. For me the most important thing in Coase’s work is that we see most of the main issues of the modern theory of the firm being raised together for the first time. He sets out to “discover why a firm emerges at all in a specialized exchange” − a question about the existence of the firm; he also sets out to “study the forces which determine the size of the firm” − an issue to do with the boundaries of the firm; and he inquires into the reasons for “diminishing returns to management” − issues to do with the internal organisation of the firm. It was the efforts to answer these questions that initiated the charge from seeing the theory of the firm as just part of price theory to seeing it as an important topic in its own right. Coase also provides one of the main building block for answers to these issues, the “costs of using the price mechanism” or transaction costs. Coase Update: Matt Nolan comments at the TVHE blog here. […]

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