The great lawyer/economist Ronald Coase is cruising into his 101st year. His 100th birthday was a few days ago (December 30, 2010) and he is still at work teaching economics, helping us to understand the world, and spreading gentlemanly good behavior and the spirit of liberty. Recently a number of my Chinese friends took part in a conference in Shanghai (organized by the Fudan University department of economics, which is chaired by the distinguished economist Prof. Li Weisen).
Coase is among the founding parents of “law and economics” and a truly great thinker and scholar. (I had the privilege of meeting him and enjoying his insights at a conference I organized years ago in Aix-en-Provence, where we talked about “intellectual property rights”; the papers presented were published in the Summer 1990 journal of the Harvard Journal of Law & Public Policy, including my own paper, “Are Patents and Copyrights Morally Justified? The Philosophy of Property Rights and Ideal Objects,” available here. His comments were insightful and during meals I learned a lot about the history of economic thought, including that his teacher was Arnold Plant, whose teacher was Edwin Canaan, and back in a line of teachers and students to Adam Smith.)
Coase’s essay on “The Nature of the Firm” revolutionized the understanding of institutions by focusing attention on transaction costs in structuring organizations. (It’s nicely summarized by Bob McTeer here: “Ronald Coase: The Nature of the Firm and their Costs.”) In 1960 (23 years later!), he revolutionized economics again with his essay on “The Problem of Social Cost,” which is nothing short of brilliant and has changed completely how serious social scientists consider human interaction. (Terry Anderson of the Property and Environment Research Center sheds some insight on the nature of social cost in “Coase’s 100th Birthday: No More ‘Externalities,’” [hat tip to Don Boudreaux for the link].)
There’s so much sheer ignorance floating around about Coase’s views on the role of property rights in “internalizing ‘externalities’” (sorry, Terry, but I did put “externalities” in double quotation marks), that it’s well worth reading Coase. He doesn’t say what some crackpots say he says, but he does help us to understand institutions, notably property. A short and very clear explanation can be found here.