Ronald Coase (1910–2013)

Who They Were

Ronald Coase (1910-2013) was a British-born economist who spent much of his career in the United States, notably at the University of Chicago, where he was long associated with the law and economics tradition. In a career spanning more than seven decades, he published relatively few papers but exerted an outsized influence through a small number of them. His key contributions appeared in articles published in 1937 and 1960; the profession's full recognition arrived decades later, reviving attention to ideas that had been ahead of their time. He also wrote on economic methodology, and is credited with the warning that if you torture the data long enough, it will confess. In 1991 he received the Nobel Memorial Prize in Economic Sciences. He remained intellectually active into extreme old age, publishing well past his hundredth year.

Key Contributions

Coase asked a question others had overlooked: why do firms exist at all, when in principle markets could coordinate every transaction? His answer was that using the market is not free, there are transaction costs to searching, bargaining and enforcing contracts, and firms arise to economise on them. In a 1960 analysis he argued that, where property rights are well defined and transaction costs are low, private bargaining between the parties can address an externality regardless of who initially holds the rights, the reasoning known as the Coase theorem and the logic behind tradable pollution permits. Together these ideas showed that transaction costs and the assignment of property rights determine how firms and markets are organised. He received the 1991 Nobel Memorial Prize for this work; his key papers of 1937 and 1960 had long preceded the recognition.

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British-American economist and 1991 Nobel laureate who explained why firms exist and how property rights and transaction costs shape markets. Play the games that feature Ronald Coase:

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