Abstract
As anyone even noddingly familiar with law-and-economics can attest, the name of Ronald Coase has become associated with the vision of a world that is free of transaction costs. Such an association derives largely from Coase’s classic article, ‘The Problem of Social Cost’. However, as should be recognized by anyone who peruses that article, its author’s chief concern lies in taking account sustainedly of the presence and implications of transaction costs.1
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Notes
See R. H. Coase, ‘The Problem of Social Cost’, 3 Journal of Law and Economics 1 (1960) (hereinafter cited as Coase, ‘Social Cost’). For a quite recent reaffirmation of Coase’s insistence on the overriding importance of transaction costs, see R. H. Coase, The Firm, the Market, and the Law (Chicago: University of Chicago Press, 1988) (hereinafter cited as Coase, The Firm), 13: In sections III and IV [of “The Problem of Social Cost”], I examined what would happen in a world in which transaction costs were assumed to be zero. My aim in so doing was not to describe what life would be like in such a world but … to make clear the fundamental role which transaction costs do, and should, play in the fashioning of the institutions which make up the economic system. There are several such passages in the opening chapter of Coase’s 1988 book, whence this quotation comes. Equally blunt is the following passage from a later chapter: ‘The world of zero transaction costs has of ten been described as a Coasian world. Nothing could be further from the truth. It is the world of modern economic theory, one which I was hoping to persuade economists to leave’ (ibid., at 174).
The critique is advanced most directly in Coase, ‘Social Cost’, note 1 above, at 28–42. For a recent reassessment of Coase’s attack on Pigou, see A.W. Brian Simpson, ‘Coase v. Pigou Reexamined’, 25 Journal of Legal Studies 53 (1996); R.H. Coase, ‘Law and Economics and A.W. Brian Simpson’, 25 Journal of Legal Studies 103 (1996). For my purposes, the most important parts of these two articles are Simpson (above), at 65–74, 92–7; and Coase (above), at 111–16. My views on the fairness of Coase’s critique are basically unchanged in the aftermath of Simpson’s article (though I concede that Coase may have overstated one or two points that are not of direct relevance to my own focus). My continued admiration of Coase’s analysis derives not least from the fact that Simpson himself — near the end of his article — interprets Coase along lines very similar to my own interpretation. See note 10 below.
For the portions of Pigou’s analysis on which Coase focuses, see A.C. Pigou, The Economics of Welfare (London: Macmillan, 1932) (4th edn), pt II, chs 1, 2, and 9. I should note, incidentally, that Coase looks askance at the term ‘externality’. See Coase, The Firm, note 1 above, at 27. I do not share his reservations.
Coase, ‘Social Cost’, note 1 above, at 31. Cf. Coase, The Firm, note 1 above, at 178: ‘The same approach which, with zero transaction costs, demonstrates that the allocation of resources remains the same whatever the legal position, also shows that, with positive transaction costs, the law plays a crucial role in determining how resources are used.’
Author information
Authors and Affiliations
Copyright information
© 1999 Matthew H. Kramer
About this chapter
Cite this chapter
Kramer, M.H. (1999). A Coda to Coase. In: In the Realm of Legal and Moral Philosophy. Palgrave Macmillan, London. https://doi.org/10.1057/9780230377493_7
Download citation
DOI: https://doi.org/10.1057/9780230377493_7
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-41016-3
Online ISBN: 978-0-230-37749-3
eBook Packages: Palgrave Religion & Philosophy CollectionPhilosophy and Religion (R0)