Ronald Coase

The Darwin Economy: Liberty, Competition, and the Common Good
by Robert H. Frank
Published 3 Sep 2011

Similarly, a firm is permitted to cut its price and thereby harm its rivals, perhaps even drive them out of business, because failure to allow this would cause even greater harm to consumers. For the harm principle to make any sense at all, it must be understood to mean that the legitimacy of a restriction must be decided by weighing its cost to those being restricted against the harm others would suffer if the behavior weren’t restricted. The Pivotal Contribution of Ronald Coase Ronald Coase (rhymes with “rose”) won the Nobel Prize in economics in 1991 largely on the strength of his contribution to our way of thinking about this delicate balancing act. An economist born and educated in England, Coase spent the latter part of his career on the faculty of the University of Chicago Law School, where he was revered by that university’s free-market 86 CHAPTER SIX enthusiasts as the world’s foremost authority on behavior that causes harm to others.

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Coase acknowledged that the wealth levels of the doctor and the factory owner would be affected by liability rules, but he insisted that their decision about how to solve the problem would not be. Never ones to shrink from debate, a group of University of Chicago economists invited Coase, who was then teaching at the University of Virginia, to Chicago to discuss his ideas with them. Twenty economists and Ronald Coase met for dinner at the home of Aaron Director, who was then editor of the Journal of Law and Economics, in which Coase’s paper had appeared. Years later, Stigler offered this recollection of the evening’s conversation: “Milton Friedman did most of the talking, as usual. He also did much of the thinking, as usual.

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Those solutions would always place the burden of adjusting to externalities on the party for whom that burden was least costly. Sometimes that would entail assigning liability to the party whom most would describe as the perpetrator. But not always. There is a measure of irony in the fact that Ronald Coase quickly emerged as the reigning intellectual hero of free-market conservatives on all matters related to activities that cause harm to others. Their embrace of Coase stems largely from the perception that his framework helped expand the range of problems believed to be soluble without regulatory intervention.

Licence to be Bad
by Jonathan Aldred
Published 5 Jun 2019

And yet the impact has not been quite what Hayek might have imagined at that inaugural meeting of the Mont Pèlerin Society, because economics has itself changed greatly since then. The rise of the society turns out to be just a small part of the story. And this is where the conspiracy theories break down. Many of the most influential thinkers behind the triumph of market economics were Mont Pèlerin Society members, including Gary Becker, James Buchanan, Ronald Coase, Milton Friedman, Richard Posner and George Stigler. But they did not always share Hayek’s views. And a few economists, such as Ken Arrow and Tom Schelling, were equally influential yet had a very different political outlook to the Mont Pèlerin gang. In the following chapters I explore how the radical ideas of these thinkers did so much to make modern mainstream economics.

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Moreover, the economists seemed unaware that offering your prospective employer a bribe to take you on might be embarrassing or awkward: the information given to participants included specific instructions on how to introduce the $500 offer, as if it were just another piece of advice on what to say in interviews. The economists’ odd view of the world was inspired by the Coase Theorem, a piece of economic theory attributed to the British economist Ronald Coase, who, coincidentally or not, was an Illinois resident. The theorem presumes that everyone, in all aspects of life, is always willing to do a deal: offering cash to get what you want or accepting cash in return for giving someone else what they want. The law, moral rules or social conventions – the social convention against bribing your way into a job, for example – will, ultimately, not get in the way of mutually beneficial deal-making.

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Other than introducing markets into areas where they did not previously exist, the Coase Theorem is a do-nothing manifesto: the government should do nothing, it should not intervene, because private deals between affected parties can solve all problems. And all this by accident. THE ACCIDENTAL ECONOMIST AND HIS ACCIDENTAL THEOREM Ronald Coase was born in December 1910, in the north-west London suburb of Willesden. Later, Coase would recollect having a ‘weakness in his legs’ as a child, a condition treated by putting him in leg irons, and his first school was a ‘school for physical defectives’.3 This seems to have led to him entering his next school, Kilburn Grammar, at the age of twelve rather than eleven.

Why Information Grows: The Evolution of Order, From Atoms to Economies
by Cesar Hidalgo
Published 1 Jun 2015

Transaction cost theory, or new institutional economics, is the branch of economics that studies the costs of transactions and the institutions that people develop to govern them. In simpler terms, it is the branch studying the cost of economic links and the ways in which people organize to deal with commercial interactions. The origins of transaction cost theory can be traced back to a 1937 paper by Ronald Coase, “The Nature of the Firm.”4 As a young scholar, Coase realized that the descriptions of the economy that were prevalent at the time tended to overlook one aspect of the economy that seemed obvious to him: the fact that economic transactions are costly. As a student at the London School of Economics, Coase attended a seminar organized by Arnold Plant, who had been recently appointed as a professor of commerce.5 It was there that Coase heard a description of the economy that contradicted his intuition and would accompany his thoughts throughout his life.

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Some firm-to-firm interactions are simple, such as ordering ink cartridges from a catalog, while others are incredibly complex, such as developing a partnership for the construction of a new manufacturing plant. Moreover, many firm interactions are embedded in social networks, which is a fact that we will consider in the next chapter. So talking about the cost of links is not simple, and it makes sense only when we define links narrowly enough. Oliver Williamson, a student of Ronald Coase, understood that commercial links come in different sizes. He wrote extensively about the connection between the cost of firm-to-firm interactions and the institutions that people develop to manage these links.11 Williamson’s classification of links is based on two axes. On the first, he separated transactions by frequency, into recurrent and occasional.

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Despite the brevity of our interactions, I drew support from them, and I am also greatly indebted to them for contributing to the environment in which these words took shape. I would be crazy not to thank them. During the summer of 2013 I wrote what became Chapters 6 and 7 at Voltage. I also studied the ideas of Ronald Coase and Oliver Williamson there. This set the foundation for what became Part III. In the fall of 2013 this book was still unfinished, but my daughter was ready to see the light of day. Iris’ birth changed this book. In a previous draft I already had a narrative explaining birth as an alien process—which had been inspired by Anna’s pregnancy—but I was lacking the emotional thrust of the actual event.

Milton Friedman: A Biography
by Lanny Ebenstein
Published 23 Jan 2007

Others who gave interviews include Gary Becker, Anna Jacobson Schwartz, Lester Telser, Larry Sjaastad, Thomas Sowell, Sam Peltzman, Stephen Stigler, Larry Wimmer, John Turner, and the late D. Gale Johnson. Paul Samuelson sent a useful letter with reactions to some questions. For my biography of Hayek, I had the opportunity to interview W. Allen Wallis, Edwin Meese, and Ronald Coase, among others, and to talk briefly on the phone with Aaron Director. I also thank in particular J. Daniel Hammond, Robert Leeson, and William Frazer for their work on Friedman; the University of California at Santa Barbara for use of its library and interlibrary loan program; the Hoover Institution on War, Revolution and Peace for use of its Friedman archive; the Intercollegiate Studies Institute and Young America’s Foundation for participation in conferences on Friedman; the Liberty Fund for participation in a conference on Frank Knight; Walter Mead for encouragement and assistance; Tom Schrock for continuing advice; Mark Skousen for calling various articles to my attention; Joe Atwill and Curtis Ridling, and Cyndy x Phillips for reviewing the manuscript; and Nik Schiffmann and Lee Gientke for research contributions.

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Shultz says that Milton’s “brilliance as an economist is well known but perhaps as important and less exalted is his capacity as an expositor. He has a gift of clarity.... [I]f he winds up talking with someone he thinks is worthwhile he has immense patience, and a willingness to engage and argue. Milton is a great arguer, and we used to say that everyone loved to argue with Milton—when he wasn’t there!”38 Ronald Coase was among the leading economists of the twentieth century, and his influence continues to grow. His best-known contribution is the Coase theorem, essentially the idea that freedom of exchange is the ultimate requirement to reach Pareto optimality, whereby no exchange will increase any party’s welfare.

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Kitch (ed.), “The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970,” Journal of Law and Economics (April 1983), is the transcript of an exceptional gathering of thirty former University of Chicago students and former and current faculty focusing on the contributions of Aaron Director and Ronald Coase to the field of law and economics. Among the participants are Milton and Rose Friedman, Stigler, Wallis, Becker, and Robert Bork, in addition to Director and Coase. There is much history and exploration of the development of ideas. A number of obituaries were written on Director’s death in September 2004.

Capitalism 3.0: A Guide to Reclaiming the Commons
by Peter Barnes
Published 29 Sep 2006

So, whether they knew it or not, were Dean Baker, Harriet Barlow, Connie Best, James Boyce, Rachel Breen, Marc Breslow, Peter Brown, Chuck Collins, Chris Desser, Peter Dorman, Brett Frischmann, Robert Glennon, Charles Halpern, Ann Hancock, Lewis Hyde, Marjorie Kelly, George Lakoff, Frances and Anna Lappé, Kathleen Maloney, Neil Mendenhall, David Morris, Richard Norgaard, Matt Pawa, Carolyn Raffensperger, Julie Ristau, Mark Sommer, Allen White, Bob Wilkinson, Susan Witt, and Oran Young. T | xvii | xviii | C A P I TA L I S M 3.0 Others whose writings have influenced me include E. F. Schumacher, Herman Daly, John Maynard Keynes, John Kenneth Galbraith, Ronald Coase, Louis Kelso, and Henry George. This entire undertaking would not have been possible without the love and support of my entire family, especially Eli and Zack. Thank you so much. Part 1 THE PROBLEM Chapter 1 Time toUpgrade Society is indeed a contract . . . between those who are living, those who are dead, and those who are to be born. — Edmund Burke (1792) or the first time in history, the natural world we leave our children will be frightfully worse than the one we inherited from our parents.

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Its premise is that nature can be preserved, and pollution reduced, by expanding private property rights. This line of thought is called free market environmentalism, and it’s favored by libertarian think tanks such as the Cato Institute. The origins of free market environmentalism go back to an influential paper by University of Chicago economist Ronald Coase. Writing in 1960, Coase challenged the then-prevailing orthodoxy that government regulation is the only way to protect nature. In fact, he argued, nature can be protected through property rights, provided they’re clearly defined and the cost of enforcing them is low. In Coase’s model, pollution is a two-sided problem involving a polluter and a pollutee.

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What I’m suggesting is that economists treat them as if they were common property held in trust. This simple supposition would not only put 90 | A SOLUTION ecosystems on the books, enabling us to track them better; it would also pave the way to real-world property rights that actually protect those ecosystems. Beyond Coase’s Supposes “Let us suppose,” economist Ronald Coase wrote in 1960, “that a farmer and a cattle-raiser are operating on neighboring properties.” He went on to suppose further that the cattle-raiser’s animals wander onto the farmer’s land and damage his crops. From this hypothetical starting point Coase examined the problem of externalities and proposed a solution—the creation of rights to pollute or not be polluted upon.

Company: A Short History of a Revolutionary Idea
by John Micklethwait and Adrian Wooldridge
Published 4 Mar 2003

The much-vaunted idea that companies are now bigger than mere governments is, as we shall see, statistically fraudulent. Big companies are giving way to small ones, so much so, in fact, that an old question is now more pressing: What is the point of companies? That question was most succinctly answered back in 1937 by Ronald Coase, a young British economist. In an article called “The Nature of the Firm,” he argued that the main reason why a company exists (as opposed to individual buyers and sellers making ad hoc deals at every stage of production) is because it minimizes the transaction costs of coordinating a particular economic activity.

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Three works published in the 1930s and 1940s asked fundamental questions about this awkward institution: Why did companies exist? Whom were they run for? And what about the workers? The most basic of these three works began as a lecture in 1932 to a group of Dundee students by a twenty-one-year-old economist just back from a tour of American industry. Five years later, Ronald Coase published his ideas in a paper in Economica called “The Nature of the Firm.” Coase tried to explain why the economy had moved beyond individuals selling goods and services to each other. The answer, he argued, had to do with the imperfections of the market and particularly to do with transaction costs—the costs sole traders might incur in getting the best deal and coordinating processes such as manufacturing and marketing.

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In 1999, America’s most valuable export was intellectual capital: the country raked in $37 billion in licensing fees and royalties, compared with $29 billion for its main physical export, aircraft.6 The story of the company in the last quarter of the twentieth century is of a structure being unbundled. Companies were gradually forced to focus on their “core competencies.” Ronald Coase’s requirement of the company—it had to do things more efficiently than the open market—was being much more sorely tested. The managers of big companies liked to claim that new technology made it more efficient to bundle things together in a single company. In a few cases, this proved correct. Big media conglomerates were able to sell the same “content” through different channels.

Humans as a Service: The Promise and Perils of Work in the Gig Economy
by Jeremias Prassl
Published 7 May 2018

This is the real value of digital work intermediation: gig-economy operators also provide information about how reliable a worker is, take care of invoicing and pay- ments, and provide a (digital) infrastructure within which the entire exchange can take place. With transaction cost so drastically reduced, the narrative continues, the traditional firm as described by Ronald Coase becomes obsolete; instead, we move into a hybrid world between markets and hierarchies. According to Coase’s theory of the firm, companies exist because the control exercised by an entrepreneur-coordinator over her workforce and other factors of pro- duction is much cheaper than the cost involved in going out to the market and haggling over each individual transaction.31 On the other hand, once an app has taken all of the hassle out of such transactions, Coase’s entrepreneur will no longer need to strike long-term bargains with workers, let alone invest in assets; she can replace her workforce with an external crowd, ready to complete individual tasks as and when required.

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If in doubt, workers and their employers can turn to the courts. Through a series of legal tests (often including elements such as control, subordination, and/or eco- nomic dependence), experienced labour judges determine who is a worker— and who is a genuine entrepreneur. Nobel-Prize-winning economist Ronald Coase was amongst the first to develop a theory underpinning this approach. He famously identified the bilateral contract of employment as the secret behind entrepreneurs’ tight control over their workforce: in return for regular wages, employees submit- ted themselves to the employer’s orders.2 Employment and social security law responded to ensure that these powers were exercised responsibly.

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For an overview, see Christopher Pissarides, ‘Equilibrium in the labor market with search frictions’ (2011) 101(4) American Economic Review 1092. His Nobel lecture is also available at http://www.nobelprize.org/nobel_prizes/ economic-sciences/laureates/2010/pissarides-lecture.pdf, archived at https:// perma.cc/U64H-QRP7 31. Ronald Coase, ‘The nature of the firm’ (1937) 4(16) Economica 386. 32. Julia Tomassetti, ‘Does Uber redefine the firm? The postindustrial corporation and advanced information technology’ (2016) 34(1) Hofstra Labor and Employ- ment Law Journal 1, 17. 33. Ibid., pt IV. 34. Ibid., 34. 35. Victor Fleischer, ‘Regulatory arbitrage’ (2010) 89(2) Texas Law Review 227, 230.

The Future of Ideas: The Fate of the Commons in a Connected World
by Lawrence Lessig
Published 14 Jul 2001

For most resources, most of the time, the market trumps the state. There are exceptions, of course, and dissenters still. But if the twentieth century taught us one lesson, it is the dominance of private over state ordering. Markets work better than Tammany Hall in deciding who should get what, when. Or as Nobel Prize-winning economist Ronald Coase put it, whatever problems there are with the market, the problems with government are far more profound. This, however, is a new century; our questions will be different. The issue for us will not be which system of exclusive control—the government or the market—should govern a given resource.

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Otherwise there would be chaos, and radio's usefulness would be largely destroyed.12 It was in the nature of things, the government argued and the Court agreed, that only if spectrum were controlled by the government would spectrum be usable. Spectrum could not be free. ABOUT THE TIME the Supreme Court came to this conclusion, an English economist was concluding just the opposite. In a review of the FCC's regulation of spectrum, economist Ronald Coase concluded that there was no justification for political regulation of access to spectrum.13 Spectrum was no more “scarce” than land or trees were scarce. Scarcity is the nature of all valuable resources; but not all valuable resources are allocated by the government—at least, not in a free society. 14 Rather than a regime of licensing, Coase argued, spectrum should be allocated into property rights and sold to the highest bidder.15 A market for spectrum would better and more efficiently allocate spectrum than a system of government-granted licenses.

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If you want to sell very weird widgets, and only a hundred thousand people are within range, then you're not likely to be able to sell enough widgets to make it worthwhile. But if you had the world as your market—if the code layer facilitated broad distribution of selective information about widgets, thus lowering the cost of information—then you might have a market large enough to make your weird widget factory work. As Ronald Coase puts it: People talk about increases in improvements in technology, but just as important are improvements in the way in which people make contracts and deals. If you can lower the costs there, you can have more specialization and greater production. . . . By improving the way the market works, you can produce immense benefits, not because it invents new technologies, but because it enables new technologies to be used. 28 The net of these layers of control in real space is relatively simple to map.

Reinventing the Bazaar: A Natural History of Markets
by John McMillan
Published 1 Jan 2002

Three Nobel laureates noted this oddity. George Stigler found it “a source of embarrassment that so little attention has been paid to the theory of markets.” Douglass North noted the “peculiar fact” that economics “contains so little discussion of the central institution that underlies neoclassical economics—the market.” Ronald Coase complained that the market has a “shadowy role” in economic theory, and “discussion of the market itself has entirely disappeared.” The Nobel laureates’ critique has now been addressed. Modern economics has a lot to say about the workings of markets. Theorists have opened up the black box of supply and demand and peered inside.

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If the air were private property, the owner could charge polluters for the “use” of it, and then there would be no externality. No one can own the air, of course, but in some other cases broadening property rights can be an effective solution. Given clearly defined property rights, individuals may negotiate a mutually beneficial solution to an externality, as Nobel laureate Ronald Coase pointed out. Imagine a cattle rancher who harms his neighbor, a corn grower, by not maintaining the fence, so the cattle wander into the cornfield and damage the crop. Suppose that fixing the fence would create value (since the repair cost is smaller than the cattle’s damage). If the corn grower has recourse to the courts, then the cattle rancher would fix the fence under the threat of being sued.

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The answer is that firms exist as a response to market frictions. Sometimes it is less expensive to run a hierarchy than to use the market. Whether a firm produces its inputs in-house or procures them from other firms depends on the relative costs of each form of transaction. One of the factors affecting this comparison, as Ronald Coase wrote in 1937, is the efficiency with which markets work. Where the transaction costs of using the market are high, firms tend to make inputs themselves. Where markets work smoothly, firms contract out much of the work. Firms do not necessarily need their own in-house production capabilities to benefit from economies of scale.

Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own
by Garett Jones
Published 15 Feb 2015

In these countries, governments will tend to be more trustworthy. I’ll provide reasons for thinking that in general, groups with higher average cognitive skills build governments that are better at creating long-term wealth. And economist Ronald Coase, whose Nobel-winning idea, the Coase Theorem, bridges the land of game theory and the land of politics, is a crucial figure in this story. Ronald Coase and the Astonishing Power of Haggling Informally, we can sum up the Coase Theorem this way: if it’s easy for two or more parties to bargain with each other, they can bargain to an efficient, win-win outcome regardless of which party has the most power going in to the negotiation.

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INDEX abstract thinking and IQ tests, 51–52, 58–59, 62 Acemoglu, Daron, 111–13 Alderman, Harold, 174n12 al-Ubaydli, Omar, 98–99 Argentina: average cognitive ability score in, 169; average IQ score in, 72, 117, 169; savings rate in, 72 Armenia: average cognitive ability score in, 169; average IQ score in, 169 Arrow, Kenneth: on economic backwardness and lack of mutual confidence, 113 Asch, Solomon: on opinions and social conformity, 131–34, 136, 167; “Opinions and Social Pressure”, 131, 132 Atlas Shrugged: Francisco d’Anconia in, 114 Australia: average cognitive ability score in, 169; average IQ score in, 169; IQ-income relationship in, 32 Austria: average cognitive ability score in, 169; average IQ score in, 169 Axelrod, Robert: on cooperation, 85, 89–91, 96, 103–4, 167; The Evolution of Cooperation, 85, 89–90, 103–4; on patience, 91; on repeated prisoner’s dilemmas (RPDs), 89–91, 103–5; on shadow of the future, 91, 99, 104; on tit for tat strategy, 103–4, 176n4; on unwritten WWI peace treaties, 103–5 Bahrain: average cognitive ability score in, 169; average IQ score in, 117, 169 Barro, Robert: Economic Growth, 76–79, 130; on international capital flows, 77–79; on patience, 77–79; on reputation, 115–16 behavioral economics, 66–68 Behrman, Jere R., 174n12 Belgium: average cognitive ability score in, 169; average IQ score in, 169 Bell Telephone System, 28–29 Benjamin, Daniel J., 67–68 Bils, Mark, 171n7 Borjas, George, 159, 160 Bosnia: average cognitive ability score in, 169; average IQ score in, 169 Botswana: average cognitive ability score in, 169; average IQ score in, 169 Bowles, Samuel, 31–32, 99 brain, the: brain scans and hyperbolic discounting, 67; brain scans and IQ, 13, 24–26; as computer, 25–26; health of, 54; limbic system, 67; prefrontal cortex, 67; size of, 24–26, 27, 28, 55 Brazil: average cognitive ability score in, 9, 169; average IQ score in, 47, 72, 169; da Vinci Effect in, 47; GDP per person and cognitive ability in, 9; government audits in, 130; informed voters in, 130; political attitudes and IQ in, 129; savings rate in, 72 Brennan, Jason: on epistocracy, 136–37 British Columbia, 44 Brown, Sebastian A., 67–68 Buchanan, James: on imposing order on chaos, 109; on limited timespan of decision-makers, 111; The Limits of Liberty, 109, 111 Bulgaria: average cognitive ability score in, 169; average IQ score in, 169 Burke, Mary A., 60 Canada: average cognitive ability score in, 169; average IQ score in, 72, 117, 169; British Columbia, 44; IQ-income relationship in, 32 Caplan, Bryan: on conformity, 73; on immigrants and politics, 162–63; on informed voters, 123–25, 130, 161, 167; on irrational voters, 121; The Myth of the Rational Voter, 121, 123; on pro-market attitudes, 124–25, 129 CEOs, 83 Cesarini, David, 94–95 Chabris, Christopher, 146–47 cheap talk, 147, 149–51 Chile, 67; average cognitive ability score in, 169; average IQ score in, 72, 117 China: average IQ in, 72, 117; average national test scores in, 2, 7, 45, 72; economic conditions in, 2, 45; as lender to U.S., 82; political conditions in, 2; savings rate in, 72, 80 Christiakis, Nicholas: Connected, 59–60 Coase, Ronald/Coase Theorem, 106–13, 118, 166 Cobb-Douglas production function, 153–58 cognitive ability, 2, 10; cross-country comparisons regarding, 7–9, 169, 170, 171n5; of elites, 28–29, 165–66; and human relationships, 147–48; Rindermann on, 7–9, 46, 47, 166, 170, 171n5; skill in one area predicting skill in another, 15–16, 18–20, 22, 23, 28–29, 44, 46–47, 68, 70, 123, 167.

The Wisdom of Crowds
by James Surowiecki
Published 1 Jan 2004

Instead, a group of people comes together: someone writes a script, someone agrees to direct, someone else puts up the money, actors and a production crew get chosen, the film is made, a distributor is found, and then the group disassembles, perhaps never to see each other again. Why not do everything this way? The oldest—and still the best—answer to that question was offered by British economist Ronald Coase in 1937. The problem with the “outsource everything” model, Coase saw, was that setting up and monitoring all those different deals and contracts takes a lot of time and effort. It takes work to find the right people, and to haggle with them over how much you’ll pay them. It takes work to ensure that everyone’s doing what they promised they would do.

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This model allows people to be handpicked for their diverse abilities (planning, safecracking, explosives, etc.), so that the group can have exactly what it needs for the job. And the one-off nature of the project ensures that everyone on the team has an incentive to perform well. The problems with this model, though, are precisely those that Ronald Coase had in mind when he talked about transaction costs. It takes a lot of work to put the group together. It’s difficult to ensure that people are working in the group’s interest and not their own. And when there’s a lack of trust between the members of the group (which isn’t surprising given that they don’t really know each other), considerable energy is wasted trying to determine each other’s bona fides.

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But, in general, whatever sacrifice might be entailed in ruling out a possibly brilliant hunch is compensated for by the better-than-average results which can be expected from a policy that can be strongly defended against well-informed and sympathetic criticism.” Similarly, Welch’s most important initiative as CEO of General Electric was his transformation of the company into what he called a “boundaryless corporation.” Harking back to the questions raised by Ronald Coase, Welch tried to make the boundaries between GE and outside markets more permeable. He broke down boundaries between GE’s different divisions, arguing that a more interdisciplinary approach to problems fostered diversity. He sharply reduced the layers of management separating the people at the top from the rest of the company.

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes
by Mark Skousen
Published 22 Dec 2006

In short, Smith desired to integrate economics and moral behavior (Fitzgibbons 1995, 3-4; Tvede 1997, 29). The Scottish philosopher believed man to be motivated by both self-interest and benevolence, but in a complex market economy, where individuals move away from their closest friends and family, self-interest becomes a more powerful force. In Ronald Coase's interpretation, "The great advantage of the market is that it is able to use the strength of self-interest to offset the weakness and partiality of benevolence, so that those who are unknown, unattractive, and unimportant will have their wants served" (Coase 1976, 544). How Monopoly Hurts the Market System Smith said that competition was absolutely essential to turning self-interest into benevolence in a self-regulating society.

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The invisible hand idea, that laissez-faire leads to the common good, has become known as the first fundamental theorem of welfare economics (as noted in chapter 1). Welfare economics deals with the issues of efficiency, justice, economic waste, and the political process in the economy. Since the late 1930s, when welfare economics was popularized by John Hicks, Kenneth Arrow, Paul Samuelson, and Ronald Coase (all of whom became Nobel Prize winners), the technique of welfare economics has been extended to issues of monopoly and government policies. In most cases, the welfare economists have demonstrated that government-imposed monopoly and subsidies lead to inefficiency and waste. Walras, Pareto, and Edgeworth were the first economists to use advanced mathematical formulas and graphic devices to prove certain hypotheses in welfare economics.

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In short, twenty-first-century economics is the "imperial science" (Skousen 2001, 7-10). Here are just a few examples of the expanding role of economics in other areas: Gary Becker has been instrumental in applying the principles of supply and demand to the human behavioral sciences in areas such as racial discrimination, crime, and marriage. Ronald Coase, Richard Posner, and Richard Epstein have contributed to the development of law and economics. Harry Markowitz, Merton Miller, William Sharpe, Burton Malkiel, and Fischer Black, among others, have created the field of financial economics, especially the application of efficiency markets to Wall Street.

The Limits of the Market: The Pendulum Between Government and Market
by Paul de Grauwe and Anna Asbury
Published 12 Mar 2017

There are millions of companies, many more than there are markets. This means that a great many economic decisions are made outside the market, within companies in which cooperation is the rule, not competition. Why do we see so many cooperative relationships within companies? One answer is offered by British economist Ronald Coase, who won the Nobel Prize in Economics in . His answer was as follows. Market transactions lead to transaction costs. The buyers and sellers have to find and trust one another. Contracts must be drawn up and the quality of goods and services evaluated. If contractual terms are not met, action must be taken.

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Rogoff, This Time is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, ). . Michael J. Sandel, What Money Can’t Buy: The Moral Limits of Markets (London: Allen Lane, ). . Kenneth J. Arrow, ‘Gifts and exchanges’, Philosophy and Public Affairs, / (), pp. –. . Ronald Coase, ‘ The Nature of the Firm’, Economica, / (November ), pp. –. . See Frans de Waal, Our Inner Ape: The Best and Worst of Human Nature (London: Granta Books, ). See also Matt Ridley, The Origins of Virtue (London: Penguin Books, ). . Erik Brynjolfsson and Andrew McAfee, Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy (Lexington, MA: Digital Frontier Press, ). .

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World
by Don Tapscott and Alex Tapscott
Published 9 May 2016

His deceptively simple invention was a formula known as double-entry accounting, where every transaction has two effects on each participant, that is, each must enter both a debit and a credit onto the balance sheet, the ledger of corporate assets and liabilities. By codifying these rules, Pacioli provided order to an otherwise ad hoc practice that prevented enterprises from scaling. Ronald Coase thought accounting was cultlike. While a student at the London School of Economics, Coase saw “aspects of a religion” in the practice. “The books entrusted to the accountants’ keeping were apparently sacred books.” Accounting students deemed his challenges “sacrilegious.”53 How dare he question their “many methods of calculating depreciation, valuing inventories, allocating on-costs, and so on, all of which gave different results but all of which were perfectly acceptable accounting practices,” and other nearly identical practices that were nonetheless deemed entirely “unrespectable.”

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So why would any established firm—particularly ones that make their money off other people’s data, operate largely behind closed doors, and suffer surprisingly little in data breach after data breach—want to leverage blockchain technologies to distribute power, increase transparency, respect user privacy and anonymity, and include far more people who can afford far less than those already served? Transaction Costs and the Structure of the Firm Let’s start with a little economics. In 1995, Don used Nobel Prize–winning economist Ronald Coase’s theory of the firm to explain how the Internet would affect the architecture of the corporation. In his 1937 paper “The Nature of the Firm,” Coase identified three types of costs in the economy: the costs of search (finding all the right information, people, resources to create something); coordination (getting all these people to work together efficiently); and contracting (negotiating the costs for labor and materials for every activity in production, keeping trade secrets, and policing and enforcing these agreements).

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Overall, the open networked enterprise shows profound, even radical potential to supercharge innovation and harness extraordinary capability to create good value for shareholders, customers, and societies as a whole. HACKING YOUR FUTURE: BUSINESS MODEL INNOVATION As for a company managed by software agents, Ronald Coase must be high-fiving up there somewhere in Economists’ Heaven (although some might dispute that such a place exists). Remember the reverse of Coase’s law? A corporation should shrink until the costs of transactions inside are less than the costs of transactions outside its boundaries. As technology continues to drop costs in the market, it’s conceivable that corporations could and should have very little inside—except software and capital.

Modern Monopolies: What It Takes to Dominate the 21st Century Economy
by Alex Moazed and Nicholas L. Johnson
Published 30 May 2016

First, as we described earlier, the platform makes it easier for developers to manage software projects. And if you’re looking for other projects, GitHub makes it easy to find them. In economic terms, GitHub significantly reduces transaction costs for people collaborating on software projects. The term “transaction cost,” coined by the economist Ronald Coase, refers to any cost incurred in making an exchange. Another term for it is a “coordination cost.” In essence, a transaction or coordination cost is the cost of participating in an interaction. Transaction costs arise because markets and communities in the real world aren’t like the perfect markets you learn about in Economics 101.

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Centralized coordination eventually lost out to decentralized markets, and market economies based on the price system have since become the default of most modern societies. The Theory of the Firm Though Hayek was able to make a persuasive case for markets over central planning, there are other important objections to the efficient markets theory to consider. This brings us to another influential economist, Ronald Coase, whom we encountered briefly in chapter 1. Coase recognized another big hole in the concept of efficient markets. If markets could coordinate economic activity efficiently, why did companies exist? What value did companies add if markets themselves were perfectly efficient? This was a problem for pro-market economists, because, as Coase noted in his Nobel Prize acceptance speech, “most resources in a modern economic system are employed within firms, with how these resources are used dependent on administrative decisions and not directly on the operation of a market.

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Royal Swedish Academy of Sciences, press release, October 14, 1975, http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1975/press.html. 3. Friedrich Hayek, Individualism and the Economic Order (Chicago, IL: University of Chicago Press, 1948). Subsequent quotes by Hayek are from this book. 4. Ibid. 5. Credit for this analogy goes to Microsoft senior researcher E. Glen Weyl. 6. Ronald Coase, “The Institutional Structure of Production,” in Nobel Lectures, Economics 1991-1995, ed. Torsten Persson (Hackensack, NJ: World Scientific Publishing, 1997). 7. Martin Reeves, George Stalk, and Filippo L. Scognamiglio Pasini, “BCG Classics Revisited: The Experience Curve,” BCG Perspectives, May 28, 2013, https://www.bcgperspectives.com/content/articles/growth_business_unit_strategy_experience_curve_bcg_classics_revisited/. 8.

Termites of the State: Why Complexity Leads to Inequality
by Vito Tanzi
Published 28 Dec 2017

At first it was challenged by a few isolated, conservative critics, and then by an increasing number of economists, political scientists, and plain citizens. Among economists, the earlier challenges had come mainly from conservative, or libertarian, pro-market economists, such as F. A. Hayek, Milton Friedman, George Stigler, James Buchanan, Ronald Coase, Alan Peacock, and a few others, and from some politicians and philosophers, such as Barry Goldwater, Robert Nozick, and others in the United States, and some in the United Kingdom and in other countries. These individuals had followed with alarm, suspicion, and growing concerns the expansion of government activities that had taken place in those years.

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However, some individuals may claim that dealing with them may be too expensive in terms of reduced economic growth or loss of employment opportunities. These concerns merit attention. What if genetic modifications significantly increase the productivity of a crop but generate a few cases of cancer? This benefit-cost criterion is in part at the base of the argument, promoted by Ronald Coase, about how to deal with externalities. It has been increasingly used in the fields of law and economics. Coase pointed out that just because an externality exists, it may not be, by itself, a sufficient argument to stop the activity that generates it, if that activity has great social value, such as a large increase in productivity.

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Pigou (1920), had been that the government should tax those who generate significant negative externalities and subsidize those who are damaged by these externalities. Alternatively, the government could impose regulations to eliminate or to reduce the negative externalities. In 1960, the British economist Ronald Coase, who later earned a Nobel Prize in economics, challenged the Pigouvian view with what came to be called the Coase theorem, which has already been referred to in this book. Coase pointed out that the activity that generates an externality might be important to society, so it might be socially inefficient to stop that activity because of the negative externality.

Ghost Work: How to Stop Silicon Valley From Building a New Global Underclass
by Mary L. Gray and Siddharth Suri
Published 6 May 2019

And in the absence of set hours, work sites, or agreement about who’s the official boss in charge, it is difficult to gauge how much ghost work is done across this burgeoning industry, who’s paying for it, and which workers are completing the tasks. The transaction costs that economist and Nobel laureate Ronald Coase so long ago identified as the reason for the very existence of firms seemed to melt away with the new on-demand systems. Platforms could keep themselves and requesters at arm’s length from workers, shielded from a formal employer’s legal responsibilities. WHEN YOUR WORK HAS NO CATEGORY The paradox of automation’s last mile suggests that the shift to using ghost work to deliver services is just heating up.32 As of today, there are hundreds of companies offering on-demand ghost work services to evaluate, sort, annotate, and refine the terabytes of “big data” that consumers produce every moment they spend online, and an explosion of companies hosting larger tasks that are, at least in part, managed by APIs.33 Still, treating ghost work as a consumable good drains ghost work jobs of any protections.

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So the humans, on both sides of the market, are left with the task of resolving these complexities at their own expense, though the workers bear the heavier brunt of these costs. The Cost of Doing Business At the heart of the on-demand economy is the premise that relying on ghost work cuts transaction costs and, therefore, boosts profits. Transaction costs are those expenses associated with managing the production and exchange of goods or services. Nobel laureate Ronald Coase, a key contributor to modern economic theory, popularized the notion of transaction costs, though he did not coin the phrase itself. His seminal 1937 article “The Nature of the Firm” was published only two years after Wagner passed the National Labor Relations Act. In it, Coase argued that businesses had to coordinate their operations, such as finding, hiring, and training workers, to reduce market frictions.

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In either case, with fewer hires needed for set, in-house tasks and more talented people necessary for rapid prototyping and testing new product ideas, many companies will have less need for full-time employees and an expanding dependency on an on-demand workforce at the ready for dynamic requests. While some transaction costs for hiring permanent workers will shrink, all businesses will continue to require some organization, at some cost, as Ronald Coase predicted.11 The question is not whether the transaction costs disappear but, rather, who pays for them? We need large corporations, which use vendor management systems to hire ghost work in bulk, to pull ghost work out of the shadows and into the daylight. As noted above, recent economic analyses of contingent labor markets confirm a sharp increase in both the amount and breadth of this type of employment.12 Corporations using an on-demand approach for enterprise-level work have, so far, increased the fissuring of the workplace, driving up the number of self-employed, independent, and vendor-managed workers to meet business-to-business needs and consumer demands for ever-evolving AI-driven products.

You've Been Played: How Corporations, Governments, and Schools Use Games to Control Us All
by Adrian Hon
Published 14 Sep 2022

David Markovits, “How McKinsey Destroyed the Middle Class,” Atlantic, February 3, 2020, www.theatlantic.com/ideas/archive/2020/02/how-mckinsey-destroyed-middle-class/605878. 100. Lawrence Mishel and Julia Wolfe, “CEO Compensation Has Grown 940% since 1978,” Economic Policy Institute, August 14, 2019, www.epi.org/publication/ceo-compensation-2018. 101. “In the Eternal Inferno, Fiends Torment Ronald Coase with the Fate of His Ideas,” Yorkshire Ranter, January 31, 2018, www.harrowell.org.uk/blog/2018/01/31/in-the-eternal-inferno-fiends-torment-ronald-coase-with-the-fate-of-his-ideas. 102. Ronald H. Coase, “The Nature of the Firm,” Economica 4, no. 16 (November 1937): 386–405, https://doi.org/10.1111/j.1468-0335.1937.tb00002.x. 103. Blake Droesch, “Amazon Dominates US Ecommerce, Though Its Market Share Varies by Category,” Insider Intelligence, eMarketer, April 27, 2021, www.emarketer.com/content/amazon-dominates-us-ecommerce-though-its-market-share-varies-by-category; Todd W.

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In the 1960s, a US CEO’s income was a pitiful twenty times that of a production worker; today, they earn almost three hundred times as much.100 Others have described a global drive, starting from the 1980s, to replace organisations with networks of contracts; APIs are arguably yet another iteration of this trend.101 The idea that a company is basically a collection of contracts originates from economist Ronald Coase’s 1937 essay “The Nature of the Firm.”102 In it, he wondered why we have firms with full-time employees rather than loose groups of independent, self-employed contractors. His answer was that while using contractors would, in theory, be cheaper due to market competition driving the price of labour down, companies would suffer significant transaction costs if they took that route—everything from constantly arguing about costs and worrying about losing trade secrets to spending too much time looking for (and keeping) good workers.

The People's Republic of Walmart: How the World's Biggest Corporations Are Laying the Foundation for Socialism
by Leigh Phillips and Michal Rozworski
Published 5 Mar 2019

Planning was in fact almost everywhere you looked, even though the discipline of economics had largely spun tales even more fantastical than UFOs visiting Earth: the fairy story of a harmonious and self-regulating market economy. Yet there has always been a minority of economists, like Simon, who have dissented, recognizing the pervasiveness, a few even the promise, of planning. Ronald Coase Asks Around In the Depression year of 1931, a twenty-year-old British economics student arrived in Chicago to pursue an unusual research project. He was there to study something that at first glance appeared utterly obvious; yet in reality it was anything but. Ronald Coase went to the United States to do something that, up to this point, few scholars in the still-young discipline of economics had cared to do: investigate how the firm, the black box at the heart of the economy, actually operated.

The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)
by Phil Thornton
Published 7 May 2014

Thus it is that Alfred Marshall has gone down in the history books as being brought up in a well-to-do middle-class London household. His biography by no less a figure than John Maynard Keynes, an erstwhile student, describes his upbringing in a clerical family from the West Country, in Clapham, a ‘leafy London suburb’, where his father was a cashier at the Bank of England. Thanks to the Nobel laureate economist Ronald Coase, we now know that Marshall was a ‘master of concealment’.1 His origins were in the more humble tanneries district of south-east London, Bermondsey, where he was born in 1842 to William, who was a clerk at the Bank of England, and a mother who was a butcher’s daughter. His family background was perhaps airbrushed to make it more fitting for the Cambridge don that Marshall would ultimately become.

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Bush 139 influence on Margaret Thatcher 138–9 influence on Ronald Reagan 139 influence on the monetarists 138–9 key economic theories 122–36 key ideas 142 libertarian views 134–6, 140 long-term legacy 137–41 nature of the free market system 131–3 Nobel Prize (1974) 137 opposition to central state planning 134–6, 140 out of fashion 129–31 prices and knowledge 131–3 Prices and Production (1931) 126, 130 rejection of government control of the economy 120 study of philosophy and economics 121–22 The Road to Serfdom (1944) 135, 138, 140 time and the value of capital 124–6 verdict 141–2 Hegel, Georg 51–2, 54 herd behaviour 105 heuristics and bias in decision making 222–5 Hicks, John 173 High Speed 2 train line from London to the North 125 hindsight bias 227 242Index Hobbes, Thomas 5 hubris hypothesis 227 human behaviour, Becker’s approach 212–15 human capital theory (Becker) 200–2, 210 human decision making processes (Kahneman) 221–5 Hume, David 4, 97 Hutcheson, Francis 3–4 illusion of validity concept 220, 224 income inequality in the present day 64–6 individualism, view of Friedman 155–7 industrial districts 84–6, 87 industrial economics 84–6, 87 Industrial Revolution 11 inflation 107, 110 actions of the central banks 161 and Keynesian policies 127 and money supply 151–2 relationship with unemployment 153–5 Institute of Economic Affairs 138, 161 interest rates effects of adjustments 103–4 effects of credit expansion 123–4 natural rate of interest (Hayek) 123 intergenerational economics 178–80 International Bank of Reconstruction and Development 109 international economics and trade, view of Samuelson 183–7 International Monetary Fund (IMF) 108–9, 113, 186 international trade and comparative advantage (Ricardo) 35–8 international trade theory 184–5 intervention during economic depression, view of Keynes 92–3, 94, 105–6 investment, volatility caused by uncertainty 104–5 invisible hand concept (Smith) 7–9 Johnson, Harry 94 Johnson, Lyndon B. 110, 190 joint-stock companies 86 Kahneman, Daniel (1934– ) 206, 217–36 behavioural economics 218–19, 233–6 biases and errors in financial decision making 225–32 cognitive biases 222–5 decision making under risk 228–32 early life and influences 219–20 economic writings and theories 221–32 from psychology to economics 225–32 gambler’s fallacy (misconception of chance) 224 heuristics and bias in decision making 222–5 human decision making processes 221–5 illusion of validity concept 220, 224 long-term legacy 233–4 loss aversion 230–2 multidisciplinary approach to economics 218 Nobel Prize for economic sciences (2002) 218, 220 optimism bias and overconfidence 226–7 Prospect Theory 228–32, 234 Thinking, Fast and Slow (2012) 226–7, 234 verdict 235–6 Kennedy, John F. 110, 190 Keynes, John Maynard (1883–1946) 19, 73, 86, 91–116, 171 aggregate demand and the role of government 102–4 Bretton Woods agreement 95, 108–9 causes of unemployment 101 challenging the classical consensus 99–106 Index243 clash with Hayek 120, 126–31 criticism from monetarists 110–11 criticism of self-correction of markets 99, 105–6 criticism of the gold standard 95, 98, 107 criticism of the quantity theory of money 97 drivers of recession 101 early life and influences 93–4 effects of changes in money supply 97 effects of interest rate adjustments 103–4 effects of reducing wages 101–2 elevation to the House of Lords 106 end of the Keynesian revival 113–14 First World War and aftermath 95–7 focus on demand side economics 127 General Theory 99–106 Great Crash (1929) 98, 99 Great Depression (1930s) 99–100 International Bank of Reconstruction and Development 109 International Monetary Fund 108–9 investments as King’s College Bursar 98, 114 investor expectations and uncertainty 104–5 key ideas 115–16 liquidity preference theory 105, 113 long-term legacy 109–14 marginal propensity to consume (MPC) 103 marginal propensity to save (MPS) 103 move into economics 94–8 multiplier concept 103 national economist to international statesman 106–9 paradox of thrift 101 periods in and out of favour 92–3 plans for post-WWII international economy 107–9 popularity of Keynesianism 109–10 revival in the 2008 financial crisis 111–13 savings and investment 100–1 Second World War and aftermath 106–9 severe falls in output 101–2 state intervention during economic depression 92–3, 94, 105–6 Treaty of Versailles 95–6 and investment volatility 104–5 unpopularity beginning in the 1970s 110–11 verdict 115 Keynes, John Neville 93 Klaus, Vaclav 140 Kotlikoff, Laurence 179 Krugman, Paul 180, 191 Kuznets, Simon 148 Laar, Mart 140 labour-intensive goods, effects of increase in wages 33 labour market, human capital concept 200–2, 210 laissez-faire economic system 9 rejection by Keynes 105–6 law of diminishing returns 31 Lehman Brothers collapse (2008) 42, 67 Leviathan (Hobbes) 5 Levitt, Steve 234 libertarian views Friedman 157 Hayek 134–6, 140 life choices, economic perspective 203–6 Lindbeck, Assar 168 liquidity preference theory 105, 113 London School of Economics (LSE) 122, 126, 128 loss aversion 230–2 Lucas, Robert 202 244Index Mackintosh, William 109 Malthus, Thomas Robert 31, 33, 169 marginal analysis 80–2 marginal change concept (Marshall) 80–2 marginal propensity to consume (MPC) 103 marginal propensity to save (MPS) 103 marginal rate of substitution 180 market equilibrium price 76–7 market mechanism (Smith) 15–16 market price, supply and demand factors 15–16 market self-correction, criticism by Keynes 99, 105–6 marriage, economic perspective 203–6 Marshall, Alfred (1842–1924) 71–89, 170 and the business world 84–6 ceteris paribus approach to economic analysis 79–80 concept of time in supply and demand 77–9 early life and influences 73–4 economics as a science 73, 86 economics theories 75–86 elasticity of demand 82–4 geographical effects in economics 84–6 industrial districts 84–6, 87 industrial economics 84–6, 87 influence on Keynes 93, 95 interaction between costs and value 75–7 key ideas 88–9 long-term legacy 86–8 marginal analysis 80–2 marginal change concept 80–2 mathematical approach to economics 72 microeconomics 72, 86 political economy 74 price as interaction of supply and demand 75–9 Principles of Economics (1890) 72, 76, 77–8, 87–8, 188 supply and demand model 75–84 verdict 88 Marx, Karl (1818–83) 19, 49–68 and the global financial crisis (2008) 61–3 capitalist exploitation of the working class 56–8, 62–3 capitalist production process 54–6 communism 50 Communist Manifesto (Marx and Engels) 52, 58–61 Das Kapital 52, 53–4, 59–61, 62, 67–8 distribution of economic value 54–6 downfall of capitalism 56–8, 61–3 early life and influences 51–3 economics theories 53–8 ‘fictitious capital’ concept 62 income inequality in the present day 64–6 key ideas 68 long-term legacy 63–7 surplus value of labour 54–6 verdict 67–8 view of Marxist governments 66 mass production 11 Massachusetts Institute of Technology (MIT) 170 mathematical approach to economics Marshall 72 Samuelson 169–70 mercantilism 7–8, 22–3 mergers and acquisitions 226–7 Merton, Robert 187 microeconomics 172–3, 174, 196 work of Marshall 72, 86 Microsoft 233 middle class, rise of 64 Mieses, Ludwig von 121–2 Mill, James 30–1 Mill, John Stuart 30, 181 The Principles of Political Economy (1848) 188 Modigliani, Franco 173 monetarism 110, 138–9, 146, 151–2 monetarist rule 152 Index245 money supply and the Great Depression (1930s) 150–2 effects of changes in (Keynes) 97 role in running the economy 151–2 monopolies evil of 10–11 regulation to prevent 21–2 multiplier effect 103, 174–5 Murphy, Kevin 201, 210–12 NAIRU (non-accelerating inflation of unemployment) 153–5 Nashat, Guity 206 neoclassical synthesis 174 neo-Keynesianism 168–9, 173–5 net profit 81 New Classical Economics 159 New Deal (Franklin D. Roosevelt) 148 New Keynesianism 159, 163 New Neoclassical Synthesis 111 Nicholas I, Tsar 52 NINJA (No Income, No Job, No Assets) homebuyers 61–2 Nixon, Richard 109, 146 Nobel laureates Kenneth Arrow (1972) 191, 213 Gary Becker (1992) 194, 195–6 Ronald Coase (1991) 73 Peter Diamond (2010) 179 Eugene Fama (2013) 160, 187 Milton Friedman (1976) 146, 147–8, 154, 161 Lars Peter Hansen (2013) 160 Friedrich Hayek (1974) 137 Daniel Kahneman (2002) 218, 220 Paul Krugman (2008) 180, 191 Simon Kuznets (1971) 148 Robert Lucas (1995) 202 Robert Merton (1997) 187 Edmund Phelps (2006) 213 Paul Samuelson (1970) 168 Myron Scholes (1997) 187 Vernon Smith (2002) 218 non-accelerating inflation of unemployment (NAIRU) 153–5 Nordhaus, William 171, 178 North American Free Trade Agreement 41, 187 North, Lord 23 Obama, Barack 162, 190 offshoring of jobs 41 OPEC 22 opportunity cost concept 201, 205 optimism bias and overconfidence 226–7 outsourcing 21 overlapping generations (OLG) model 178–80 Pareto, Vilfredo 182 Pareto efficiency 182 pensions and pension funds 178 permanent income hypothesis (Friedman) 148–50 Perot, Ross 41 Phelps, Edmund 154, 213 Philip, Prince 158 Pigou, A.C. 95 Pinochet, Augusto 161 political economy 28, 74, 93 population growth theories Malthus 31 Ricardo 31, 32–3 Posner, Richard 215 Predictably Irrational (Ariely, 2009) 234 prejudice economic perspective of Becker 196–7, 198–9 views of Friedman 157 price, as interaction of supply and demand (Marshall) 75–9 prices and knowledge (Hayek) 131–3 Prices and Production (Hayek, 1931) 126, 130 Principles of Economics (Marshall, 1890) 72, 76, 77–8, 87–8, 188 private savings, influence of taxation policy 43–4 private sector windfalls, impact of stimulus measures 43–4 privatisation of state-owned monopolies 21 246Index productivity, and division of labour 11–14 Prospect Theory (Kahneman) 228–32, 234 protectionism 22–3, 33–5, 41–2, 185 public goods economics 175–8 purchasing price parity (PPP) measures 186 quantitative easing 162, 163 quantity theory of money, criticism by Keynes 97 Rae, John 23 rational choice model (Becker) 197, 212–15, 216 challenge from Kahneman 221–33 rational expectations hypothesis 111, 137 Reagan, Ronald 19, 20, 139, 146, 158, 160 recession drivers of (Keynes) 101 see also Great Recession (2009) reflection effect 229 revealed preference theory 180–1 reverse elasticity 84 Ricardo, Abraham 28–9 Ricardo, David (1772–1823) 27–46, 183 attack on the Corn Laws 33–5 early life and influences 28–30 from finance to economics 30–1 global free trade 40–2 government debt 38–9 influence of Adam Smith 30 international trade and comparative advantage 35–8 key ideas 46 long-term legacy 40–4 on the general workings of the economy 31–3 on wealth creation and distribution 31–3 political career 30 population growth theories 31, 32–3 The Principles of Political Economy and Taxation (1817) 28, 31–3, 188 Ricardian equivalence 38–9 Ricardo effect 33 verdict 45–6 wine and cloth example 35, 37, 40–1 Ricardian equivalence 38–9 Ricardo effect 33 Robbins, Lionel 122, 129 Rogeberg, Ole 211 Rogoff, Kenneth 189–90 Roosevelt, Franklin D. 148 Samuelson, Paul (1915–2009) 37, 106, 137, 159, 167–92 autarky concept 184 early life and influences 169–70 economics in action 190–1 Economics: An Introductory Analysis (1948) 168, 171–3, 188–9 efficient markets 187 ethical judgements in economics 182–3 explaining trade imbalances 184–5 factor price equalisation theorem 186–7 financial economics 187 Foundations of Economic Analysis (1947) 168, 169–70 global public goods 177–8 influence of Keynes 171–2 influence on economic theory 189–90 intergenerational economics 178–80 international economics and trade 183–7 key economic theories and writings 171–87 long-term legacy 188–91 mathematical approach to economic issues 169–70 microeconomic market system 172–3, 174 multiplier effect 174–5 Index247 neoclassical synthesis 174 neo-Keynesianism 168–9, 173–5 Nobel Prize in economic sciences (1970) 168 oscillator model of business cycles 174–5 overlapping generations (OLG) model 178–80 public goods and public finance 175–8 public goods economics 175–8 revealed preference theory 180–1 understanding consumer behaviour 180–1 verdict 191–2 warrant pricing 187 welfare economics 181–3 Scholes, Myron 187 Schwartz, Anna 150–1, 162 Scottish Enlightenment 3 Second World War 95, 96 self-interest theory of Adam Smith 2–3, 6, 8–9, 20 Skidelsky, Robert 114, 128 slavery 10–11 Smith, Adam (1723–90) 1–25, 97, 230–1 A Theory of Moral Sentiments (1759) 2, 5–6 division of labour and productivity 11–14 drivers of rates of pay 12–13 early life and character 3–5 free-market mechanism of supply and demand 8–9 free international trade 13–14 from philosophy to economics 6–7 functions funded by general taxation 16 functions of the state 16–18 functions that users should pay for 16–17 idea of ‘natural liberty’ 8 idea of ‘sympathy’ of people for each other 6 key ideas 25 long-term legacy 19–23 market price of a commodity 15–16 on slavery 10–11 personal legacy 23 pin factory example 11–13 role of the state in the economy 9, 10 self-interest theory 2–3, 6, 8–9, 20 taxation principles 17–18 the evil of cartels and monopolies 10–11 the invisible hand 7–9 the market mechanism 15–16 The Wealth of Nations (1776) 2–3, 6, 7–25, 188 verdict 23–4 Smith, Vernon 218 Smoot-Hawley Tariff Act (US) 42 social security systems 179 social welfare function 182–3 socialism 134–6 sovereign debt crisis in Greece 113–14 Soviet Union, collapse of 140, 158 Sraffa, Piero 130–1 stagflation in the 1970s 154, 173–4 Standard Oil Company of New Jersey 21 state-owned monopolies, privatisation programmes 21 Statecraft (Thatcher, 2002) 19 status quo bias 227–8 stimulus measures, debate over effects of 43–4 stimulus versus austerity debate 43–4, 140–1 Stockholm School of Economics 168 Stolper, Wolfgang 184–5 Stolper–Samuelson theorem 184–5 Strachey, Lytton 94 structural unemployment 155 substitution effect, response to price change 82, 83 Summers, Anita 190 Summers, Lawrence 190 Summers, Robert 190 Sunstein, Cass 234 248Index supply and demand market mechanism 8–9, 15–16, 75–84 supply side economics 127, 201 surplus value of labour (Marx) 54–6 taxation policy influence on private savings 43–4 views of Adam Smith 16–18 taxpayers, view of government debt (Ricardo) 38–9 Thaler, Richard 232, 234, 235 Thatcher, Margaret 19, 138–9, 155, 160–1 The General Theory of Employment, Interest and Money (Keynes, 1936) 99–106 The Principles of Political Economy (Mill, 1848) 188 The Principles of Political Economy and Taxation (Ricardo, 1817) 28, 31–3, 188 The Road to Serfdom (Hayek, 1944) 135, 138, 140 The Wealth of Nations (Smith, 1776) 2–3, 6, 7–25, 188 Thinking, Fast and Slow (Kahneman, 2012) 226–7, 234 time factor and the value of capital (Hayek) 124–6 in the supply and demand model 77–9 Townshend, Charles 5, 6–7 Toyota, production systems 21 trade barriers 22–3, 41–2, 185 Corn Laws 33–5 trade imbalances, Samuelson’s explanation 184–5 trade unions 19 transient income concept 149 Treatise on Human Nature (Hume) 4 Treaty of Versailles 95–6 Tversky, Amos 218, 220, 221–5, 228–33, 235 Ulam, Stanislaw 37 uncertainty and investment volatility 104–5 unemployment causes of (Keynes) 101 frictional 155 ‘natural’ rate of (Friedman) 153–5 relationship with inflation 153–5 structural 155 United States housing market crisis (2008) 61–2, 112 import tariffs after the Wall Street Crash 42 savings and investment imbalance with China 113 trade imbalance with China 45 US Federal Reserve 111–12 action to control inflation 161 and the 2008 financial crisis 235 influence of monetary policy 159 money supply and the Great Depression (1930s) 150–2 quantitative easing (2009 onward) 162 role in the Great Depression (1930s) 159 utilitarianism 31, 182 value and costs of production 75–7 distribution of economic value (Marx) 54–6 surplus value of labour (Marx) 54–6 Voltaire 7 wages drivers of wage rates (Smith) 12–13 effects of reducing (Keynes) 101–2 relationship to rents and profits 32–3 surplus value of labour (Marx) 54–6 Wall Street Crash (1929) 23, 42 Wallich, Henry 190–1 warrant pricing (Samuelson) 187 wealth creation and distribution, view of Ricardo 31–3 Index249 welfare economics 181–3 White, Harry Dexter 108 Wilberforce, William 10 Wittgenstein, Ludwig 121 women in the workforce 202 Wood, Kingsley 106 Woolf, Leonard 94 World Bank Group 109 World Trade Organization (WTO) 22, 40–1, 185 

To Save Everything, Click Here: The Folly of Technological Solutionism
by Evgeny Morozov
Published 15 Nov 2013

Anderson, “The Difference between Online Knowledge and Truly Open Knowledge,” The Atlantic, February 3, 2012, http://www.theatlantic.com/technology/archive/2012/02/the-difference-between-online-knowledge-and-truly-open-knowledge/252516 . 39 “At the very same time [that “the Internet” is blamed]”: Weinberger, Too Big to Know, xii. 40 Here Comes Everybody: Clay Shirky, Here Comes Everybody: The Power of Organizing without Organizations (New York: Penguin, 2009). 40 Susanne Lohmann’s explanation of the 1989 protests in East Germany: Susanne Lohmann, “The Dynamics of Informational Cascades: The Monday Demonstrations in Leipzig, East Germany, 1989–91,” World Politics 47, no. 1 (October 1, 1994): 42–101. 40 Ronald Coase’s theory of the firm: Ronald Coase, “The Nature of the Firm,” Economica, 4 (1937): 386–405. 40 in order to explain the 1989 protests: Lohmann, “The Dynamics of Informational Cascades.” 41 “Generalizing about social movements”: Stephen Kotkin, Uncivil Society: 1989 and the Implosion of the Communist Establishment (New York: Random House Digital, Inc., 2009), 147. 41 “behavior is motivation that has been filtered through opportunity”: Clay Shirky, Cognitive Surplus: How Technology Makes Consumers into Collaborators, reprint ed.

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Take Clay Shirky’s Here Comes Everybody, which enjoys a cult status in geek circles as a seemingly original argument about the falling costs of collaboration. For much of his theoretical apparatus, Shirky draws on two sources: Susanne Lohmann’s explanation of the 1989 protests in East Germany by means of rational-choice theory (from which Shirky borrows the notion of information cascades) and Ronald Coase’s theory of the firm (from which Shirky borrows the notion of transaction costs). Alas, neither of them is an unambiguously good or neutral guide to understanding digital technologies once we liberate ourselves from Internet-centrism. Like most scholars in the rational-choice tradition, Lohmann—whom Shirky misidentifies as a historian (she’s a political scientist)—doesn’t explain collective action of East Germany by attending to historical and cultural factors or tracing the emergence of new attitudes or ideologies.

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To challenge this ideology and this way of talking and thinking is to be immediately dismissed as too pessimistic or optimistic, as if no other type of critique were even conceivable. It’s one of the hallmarks of Internet-centrism—at least as it manifests itself in the popular debate—that it brooks no debates about methodology, for it presumes that there’s only one way to talk about “the Internet” and its effects. Shirky’s veneration of Ronald Coase’s theory of the firm—and its accompanying discourse on transaction costs—may seem harder to dismiss, not least because Coase is a Nobel Prize–winning economist. References to Coase pop up regularly in the work of our Internet theorists; in addition to Clay Shirky, Yochai Benkler also draws heavily on Coase to discuss the open-source movement.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be
by Moises Naim
Published 5 Mar 2013

Such resources are a necessary precondition of power; but without an effective way of managing them, the power they create is less effective, more transient, or both. Weber’s central message was that without a reliable, well-functioning organization, or, to use his term, without a bureaucracy, power could not be effectively wielded. If Weber helped us understand the rationale and workings of bureaucracy in the exercise of power, the British economist Ronald Coase helped us understand the economic advantages that they conferred on companies. In 1937, Coase produced a conceptual breakthrough that explained why large organizations were not just rational according to a certain theory of profit-maximizing behavior but, indeed, often proved more efficient than the alternatives.

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Marxists argued that the expansion of capitalism brought with it the reinforcement of class divisions and, through imperialism and the spread of finance capital around the world, the replication of these divisions both within countries and between them. But the rise of large hierarchical organizations focused a very particular critique that owed a debt to Weber, for its focus, and to Marx, for its argument. In 1951, the Columbia University sociologist C. Wright Mills published a study titled White Collar: The American Middle Classes.26 Like Ronald Coase, Mills was fascinated by the rise of large managerial corporations. He argued that these firms, in their pursuit of scale and efficiency, had created a vast tier of workers who carried out repetitive, mechanistic tasks that stifled their imagination and, ultimately, their ability to fully participate in society.

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All of these differences in business scope, resources, and operating environment affect the cost of doing business, decisions to expand, and the choice of whether to take on an activity in-house or to farm it out to a supplier or contractor. In short, they produce the structure of industries. A whole field of economics—industrial organization—arose almost a century ago to make sense of industry structure and explain what made it change, or not change. As discussed in Chapter 3, the field drew on the insight of Ronald Coase, the British economist who in 1937 first propounded the notion that transaction costs helped to explain why firms and industries took particular shapes.22 Individually or together, the companies that dominate a particular industry or marketplace spend a great deal of their energy working to keep things that way.

Transaction Man: The Rise of the Deal and the Decline of the American Dream
by Nicholas Lemann
Published 9 Sep 2019

The financial economists had laid waste to the traditional ways of thinking about the financial mechanisms associated with the almighty corporation—stocks and bonds—but what about the corporation itself? Shouldn’t it be subject to the same kind of devastatingly rigorous and unsentimental analysis? An early crack in the intellectual edifice around the corporation appeared way back in 1937, in the form of an article called “The Nature of the Firm,” by Ronald Coase, a twenty-six-year-old British economist who joined the University of Chicago faculty not long after Michael Jensen had arrived there as a graduate student, and who later won the Nobel Prize. “Why is there any organization?” in business, Coase asked. Why not just let the unimpeded market, rather than corporate managers, decide where to build plants, when to launch products, and where to direct workers?

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Corporations were bureaucratic entities, not economic entities, and in that respect they were a black box: nobody really knew what went on inside them. But that could be changed. In 1976 Jensen and Meckling produced a long, detailed, formula-filled paper called “Theory of the Firm” (the title is a tribute to Ronald Coase’s article of forty years earlier) and submitted it to the leading economics journal that focused on organizations. The journal turned it down. (This was to Jensen’s mind, especially later, a badge of honor and a sign that a paradigm shift was arriving; several crucial papers on financial economics had also been turned down by the leading finance journals.)

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It implied, unsurprisingly, that the Economic Graph the company had been promoting was the key to growth: whether or not it was a direct case of cause and effect, cities with denser networks of LinkedIn connections produced more new jobs than cities with sparser networks. The perpetually exuberant intellectual culture of Silicon Valley had rediscovered Ronald Coase’s old essay “The Nature of the Firm”; the current read of it was that the Internet had reduced transaction costs so radically that conventional business organizations were becoming unnecessary (which of course meant that conventional benefits and pensions would be unnecessary too). Even the most complex projects could be executed by loose, temporary assemblages of talent.

The Elements of Data Analytic Style
by Jeff Leek
Published 1 Mar 2015

With this kind of data it is possible to describe the person or sample, but generally impossible to infer anything about a population they come from. 2.8.4 Data dredging Interpreting an exploratory analysis as inferential Similar to the idea of overfitting, if you fit a large number of models to a data set, it is generally possible to identify at least one model that will fit the observed data very well. This is especially true if you fit very flexible models that might also capture both signal and noise. Picking any of the single exploratory models and using it to infer something about the whole population will usually lead to mistakes. As Ronald Coase said: “If you torture the data enough, nature will always confess.” This chapter builds on and expands the paper “What is the question?” co-authored by the author of this book. 3. Tidying the data The point of creating a tidy data set is to get the data into a format that can be easily shared, computed on, and analyzed. 3.1 The components of a data set The work of converting the data from raw form to directly analyzable form is the first step of any data analysis.

The Innovation Illusion: How So Little Is Created by So Many Working So Hard
by Fredrik Erixon and Bjorn Weigel
Published 3 Oct 2016

As in most other companies operating in markets where there are quick product and technology turnover rates, the managements of failing firms also know that over time there is only one question that should keep them awake at night: should we destroy our own offering, or should we let another company do it for us? Still they failed. And to understand the mechanics of failure we need first to understand the firm and why it exists. There is no better starting point than Ronald Coase, the Nobel laureate in economics who rebelled against “blackboard economics” and made the firm the center of economic inquiry. Coase started from a simple, almost banal, observation – surprisingly controversial at the time. Companies, he argued, are not black boxes that cannot be understood by economists.

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Globalization has moved the boundaries between firm and market In order to understand second-generation globalization and how it could spur efficiency rather than contestable innovation, and generally create markets with managed competition, we need to go back to the basics of industrial organization, and especially Ronald Coase. As companies grew bigger, global, and fragmented they changed their habits but not their character. They still operate, for want of a better word, on “the Coasean principle,” the source code of corporate behavior that we introduced in the previous chapter. The beauty of globalization was that it cut market transaction costs – and, as a consequence, allowed for a reorganization of production.

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Countries such as Finland, France, Germany, and the UK are more dependent on larger enterprises (with a workforce in excess of 250 people) than Italy, Portugal, and Spain.60 As we have discussed previously, large firms are closer to the productivity frontier. They help to import new technology and better production processes, partly because they are anchored in international markets to a far greater degree than small firms. Their FDI is a vehicle for raising productivity and prosperity in many parts of the world. Ronald Coase’s simple idea helps us to understand how concentration in recent decades has gone up – and progressively reduced the space for market experimentation and contestability. As market transaction costs were reduced, firms narrowed their ownership advantages and put a lot more effort into raising the boundaries around them and their assets.

Cogs and Monsters: What Economics Is, and What It Should Be
by Diane Coyle
Published 11 Oct 2021

Many economists (including me [Coyle and Sensier 2020], but also Hausman [2012]) have been critical of the way cost-benefit analysis is implemented. But it is always better to make decisions aware that there are costs and benefits, and with some systematic framework for assessing them. When they are not made explicit, there will always be an implicit judgement, just as there is when we make choices in everyday life. Ronald Coase (1960) also pointed out that a cost-benefit analysis of any policy also needs to put the costs of the policy action itself into the judgement. The government economist is part of the equation she is assessing: It is clear that the government has powers which might enable it to get some things done at a lower cost than could a private organisation.… But the governmental administrative machine is not itself costless.

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This is fundamental in competition analysis and in good business economics—including estimating the effect of introducing a low-priced copy of a consumer good into a market—and I hope it is now taught in all econometrics courses. Yet even when a counterfactual or alternative hypothesis is explicitly considered, many economists will fall into the trap (described with typical clarity by Ronald Coase, as noted in Chapter One) of comparing a policy with ‘an abstract model of a market situation.… Unless we realise we are choosing between social situations which are all more or less failures, we will not make much headway.’ In other words, to evaluate a policy, realistic counterfactuals must be the point of comparison; otherwise the assessment is no more than what Coase described as ‘blackboard economics’ (Williams and Coase 1964).

Working in Public: The Making and Maintenance of Open Source Software
by Nadia Eghbal
Published 3 Aug 2020

Once companies started using open source for commercial purposes, and people realized that these “hobby projects” were able to compete with the software made by paid employees, scholars had to come up with a new framework to explain this behavior. Previously, our understanding of how and why people make things was modeled after Ronald Coase’s theory of the firm, which proposes that firms (i.e., companies, organizations, and other institutions with centralized resources) naturally emerge as a way to reduce transaction costs in the market.109 Coase would’ve told us that only companies make software because, from a coordination standpoint, managing the resources required to pull off such a feat would be most efficiently handled within the same organization.

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Taylor, Watch Me Play: Twitch and the Rise of Game Live Streaming (Princeton, NJ: Princeton University Press, 2018), 92–93. 102 MacCallum, The Art of Community, 67. 103 Nadia Eghbal, “Emerging Models for Open Source Contributions” (presentation, GitHub CodeConf, Los Angeles, June 29, 2016), https://www.slideshare.net/NadiaEghbal/emerging-models-for-open-source-contributions. 104 Mikeal Rogers, “Healthy Open Source,” Node.js Collection, Medium, February 22, 2016, https://medium.com/the-node-js-collection/healthy-open-source-967fa8be7951. 105 Taylor Wofford, “Fuck You and Die: An Oral History of Something Awful,” Vice, April 5, 2017, https://www.vice.com/amp/en_us/article/nzg4yw/fuck-you-and-die-an-oral-history-of-something-awful. 106 Adam Rowe, “Why Paid Apps Could Be the Future of Online Communities,” Tech.co, November 1, 2019, https://tech.co/news/woolfer-paid-app-online-communities-2019-11. 107 Kevin Simler, “Border Stories,” Melting Asphalt, March 2, 2015, https://meltingasphalt.com/border-stories/. 03 108 Star Simpson (@starsandrobots), “Til recently you were online . . .,” Twitter, November 5, 2017, 6:54 p.m., https://twitter.com/starsandrobots/status/927323260244463616. 109 Ronald Coase, “The Nature of the Firm,” Economica 4, no. 16 (November 1937): 386–405, https://doi.org/10.1017/cbo9780511817410.009. 110 Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge: Cambridge University Press, 1990), Loc 2053. 111 Yochai Benkler, “Coase’s Penguin, Or, Linux and ‘The Nature of the Firm,’” The Yale Law Journal 112, no. 3 (2002): 369–446, https://doi.org/10.2307/1562247. 112 Benkler, “Coase’s Penguin,” 381. 113 Guido van Rossum, “Foreword for ‘Programming Python’ (1st Ed.),” Python.org, May 1996, https://www.python.org/doc/essays/foreword/. 114 Linus Torvalds, “LINUX’s History,” Carnegie Mellon University School of Computer Science, July 31, 1992, https://www.cs.cmu.edu/~awb/linux.history.html. 115 Linus Torvalds, “Re: Kernel SCM Saga..,” Mailing List ARChive, April 7, 2005, https://marc.info/?

What's Wrong With Economics: A Primer for the Perplexed
by Robert Skidelsky
Published 3 Mar 2020

They start with a hypothesis and then try to prove it. The hypothesis is not ‘plucked from the air’. Nor is it based on systematic observation, even though economists often appeal to the ‘indisputable facts of experience’. Rather, it is based on the claim to ‘direct acquaintance’ or ‘intuitive’ knowledge of how humans think. Ronald Coase (1910–2013) recalled the English economist Ely Devons (1913–1967) saying to him, ‘If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, “What would I do if I were a horse?” And they would soon discover that they would maximise their utilities.’7 This joke gives a profound insight into the economic method.

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Its main idea was that individuals form institutions to reduce the ‘transaction’, especially ‘information’, costs of trading individually in markets. The neoclassical logic remains intact: individuals create institutions to maximise their utilities. The father of this approach was Nobel Laureate Ronald Coase (1910–2013), whose seminal article on the firm appeared in 1937, in reaction against the then prevalent theories of oligopolistic competition. It took the overthrow of Keynesianism by the new classical economics in the 1970s and 1980s for his ideas to gain currency. Today they comprise the orthodox microeconomics of institutions.

Liars and Outliers: How Security Holds Society Together
by Bruce Schneier
Published 14 Feb 2012

shoddy building practices Heather Timmons (25 Apr 2003), “Shoddy Building in the Housing Boom?” Bloomberg BusinessWeek. used to be smaller John Stopford (1998), “Multinational Corporations,” Foreign Policy, 113:12–24. Gardiner C. Means (1931), “The Growth in the Relative Importance of the Large Corporation in American Economic Life,” The American Economic Review, 21:10–42. Ronald Coase first Ronald Coase (1937), “The Nature of the Firm,” Economica, 4:386–405. Nick Leeson's Richard W. Stevenson (28 Feb 1995), “The Collapse of Barings: The Overview: Young Trader's $29 Billion Bet Brings down a Venerable Firm,” New York Times. Erik Ipsen (19 Jul 1995), “Bank of England Cites Fraud in Barings Collapse,” New York Times.

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Most organizations are hierarchical, making communications easier. And militaries have generally been examples of the largest-sized organization a particular technological level can produce. But there's a limit where the costs of communications outweigh the value of being part of one organization. Economist Ronald Coase first pointed this out in 1937. Called “Coase's limit” or “Coase's ceiling,” it's the point of diminishing returns for a company: where adding another person to an organization doesn't actually add any value to the organization. You can think of an employee inside of an organization having two parts to his job: coordinating with people inside the organization and doing actual work that makes the company money.

Vulture Capitalism: Corporate Crimes, Backdoor Bailouts, and the Death of Freedom
by Grace Blakeley
Published 11 Mar 2024

Modern capitalist societies are characterized by “a hierarchy of power in which a few immense trading companies—in control of and to some degree in cahoots with a few dominant supply conglomerates—govern almost all the industrial activities upon which we depend, and they back their efforts with what amounts to police power.”48 So how does this planning work in practice? And how can we resist this planning in our workplaces? We’ll turn to these questions over the course of this chapter. Black Box Businesses Ronald Coase was a Nobel Prize–winning economist best remembered for providing an explanation as to why businesses were necessary under capitalism. This might seem like a rather trivial matter for which to award a Nobel Prize—after all, most of us consider business the lifeblood of capitalist economies. Even the word capitalism is likely to conjure up images of famous brands like McDonald’s and Coca-Cola.

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Arrow and Hahn, for example, write that “Adam Smith’s ‘invisible hand’ is a poetic expression of the most fundamental of economic balance relations, the equalization of rates of return, as enforced by the tendency of factors to move from low to high returns.” Anything that gets in the way of this tendency of factors to move from low to high returns represents an impediment to the functioning of the free market. Kenneth J. Arrow and Frank H. Hahn, General Competitive Analysis (San Francisco: Holden-Day, 1971), 1. 51. Ronald Coase, “The Nature of the Firm,” Economica 4, no. 16 (1937). 52. Ferreras, Firms as Political Entities; Chamayou, The Ungovernable Society. 53. Walker, The Theory of the Firm. 54. Marx, Capital, Volume I. 55. Ferreras, Firms as Political Entities. 56. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1991, “Ronald H.

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Coase: Biographical,” The Nobel Prize, accessed July 8, 2023, https://www.nobelprize.org/prizes/economic-sciences/1991/coase/biographical/. 57. Ronald H. Coase, “Law and Economics and A. W. Brian Simpson,” Journal of Legal Studies 25, no. 1 (January 1996): 103–19, https://www.jstor.org/stable/724523. 58. Ibid. 59. Ronald Coase, The Nature of the Firm: Origins, Evolution, and Development (New York: Oxford University Press, 1993). 60. Grant M. Hayden and Matthew T. Bodie, Reconstructing the Corporation: From Shareholder Primacy to Shared Governance (Cambridge: Cambridge University Press, 2020). 61. Walker, The Theory of the Firm. 62.

The Armchair Economist: Economics and Everyday Life
by Steven E. Landsburg
Published 1 May 2012

But whoever controls the resource, and however his control is protected, he will find it to his private advantage to direct the resource to its most profitable use, regardless of whether that use is by him or by his neighbor. The court cannot affect the profitability of either enterprise and therefore cannot control how the resource is employed. This startling observation about the impotence of judges was made in 1961 by Professor Ronald Coase of the University of Chicago Law School. While it is obvious once stated, it seems to have come as a revelation to economists, jurists, and legal scholars. It also marked the birth of a new academic specialty: the economic analysis of law. In Coase's honor, his observation has come to be called the Coase Theorem.

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When I presented David Friedman with the airline ticket conundrum from the end of the chapter, he immediately responded by telling me that if I believed in an efficiency standard for personal conduct, I was honor-bound not to retrieve the next dollar bill that I dropped. Of Medicine and Candy, Trains and Sparks: The entire chapter is inspired by Ronald Coase's article on social cost, published in the Journal of Law and Economics in 1960. Sound and Fury: James Kahn pointed out to me the irony of Al Gore's timing. How Statistics Lie: The observation about Star Market's misleading advertising is due to Walter Oi. The Policy Vice: The observation that the possibility of "scoops" might justify either taxing or subsidizing inventors is due to Marvin Goodfriend.

How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present
by Thomas J. Dilorenzo
Published 9 Aug 2004

But there have been hundreds—probably thousands—of scholarly studies of the effectiveness of government regulation, and these studies show that usually regulation either is ineffective or makes a problem worse. Many of these studies have been published in the prestigious, peer-reviewed Journal of Law and Economics, published by the University of Chicago Law School. The onetime-editor of the Journal, Nobel laureate Ronald Coase, summed it up: There have been more serious studies made of government regulation of industry in the last fifteen years or so, particularly in the United States, than in the whole preceding period. These studies have been both quantitative and nonquantitative. . . . The main lesson to be drawn from these studies is clear: they all tend to suggest that the regulation is either ineffective or that when it has a noticeable impact, on balance, the effect is bad, so that consumers obtain a worse product or a higher-priced product or both as a result of regulation.

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John Kerry, meanwhile, condemned the Bush administration for its “obsession with giveaways to their friends in the oil business” and declared that “these blackouts also expose some of the failures of this administration’s energy policies” (quoted on Meet the Press, NBC, August 17, 2003). CONCLUSION: THE NEVER-ENDING WAR ON CAPITALISM 1. Michel Jensen and William Meckling, “The Future of Capitalism,” Financial Analyst’s Journal, May 1978, 1. 2. Ludwig von Mises, Liberalism: In the Classical Tradition (Irvington, NY: Foundation for Economic Education, 1985), 102. 3. Ronald Coase, “Economists and Public Policy,” in J. Fred Weston, ed., Large Corporations in a Changing Society (New York: New York University Press, 1975). 4. Fred S. McChesney, Money for Nothing: Politicians, Rent Extraction, and Political Extortion (Cambridge: Harvard University Press, 1997). 5. Ibid., inside cover. 6.

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It
by Stephen Davis , Jon Lukomnik and David Pitt-Watson
Published 30 Apr 2016

Where transaction costs are high, it is difficult to get markets to work. For example, lighthouses find it hard to charge passing ships for their service. Traditional economists had bundled these into a separate sort of product, known as “public goods,” where markets will fail and the goods must be purchased by the state. But as the Chicago economist Ronald Coase pointed out, the difference between the transaction costs involved in the provision of lighthouses and other goods is one of degree, not of quality. He noted that the first lighthouses were privately provided by the operators of nearby ports, and concluded that by dividing the world into “private goods,” where markets would regulate prices effectively, and “public goods,” where they would not, economists had posed the wrong question.30 The issue was not about whether there should be state or private provision, but how best to manage transaction costs so that the buyer and seller could easily strike a good deal.

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Merriam-Webster.com defines capitalism as “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.” Other dictionaries similarly cite private ownership as central to the definition of capitalism. www.merriam-webster.com/dictionary/capitalism, accessed September 27, 2013. Indeed, for economists such as Ronald Coase and Friedrich Hayek, the marriage of ownership and control rights is essential to the effective working of the system. 3. Warren Buffett, letter in 2002 Annual Report of Berkshire Hathaway. 4. James Saft, “The Wisdom of Exercising Patience in Investing” (Reuters, March 2, 2012). This is not a new phenomenon.

Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It)
by Salim Ismail and Yuri van Geest
Published 17 Oct 2014

Today it’s down to about five years. In his recent book, The Startup of You, LinkedIn founder Reid Hoffman notes that individuals will increasingly learn to manage themselves as companies, with brand management (MTP!), and marketing and sales functions all brought down to the individual. Similarly, Ronald Coase, who won the Nobel Prize in Economics in 1991, noted that enterprises are more like families than industries, and that corporations are more of a sociological construct than an economic one. For any company today, having a permanent, full-time workforce is fraught with growing peril as employees fail to keep their skills up to date, resulting in personnel in need of greater management.

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Besides, being eaten alive by an upstart competitor is anything but relaxing. This shift will, of course, be quite challenging for large organizations, which rely on drawn-out projections and tracking for planning and control purposes. 6. Smaller Beats Bigger (aka Size Does Matter, Just not the Way You Think) Ronald Coase won the 1991 Nobel Prize in Economics for his theory that larger companies do better because they aggregate assets under one roof and, as a result, enjoy lower transaction costs. Two decades later, the reach delivered by the information revolution has negated the need to aggregate assets in the first place.

Big Business: A Love Letter to an American Anti-Hero
by Tyler Cowen
Published 8 Apr 2019

I’m more likely to think of a corporation as a carrier of reputation and a kind of metaphorical personhood, and less likely to think of a corporation as a means of minimizing transactions costs, as many mainstream economists have suggested. In a famous 1937 article, “The Nature of the Firm,” the economist and Nobel laureate Ronald Coase defined the nature of economic thought about the corporation for many decades to come. In that piece, he described the corporation as essentially a means of reducing transactions costs. It’s not always easy to hire the worker you want just by going out into spot labor markets, not to mention get that worker to do your bidding.

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At the same time, those bureaucracies keep some of the employees from “going off the reservation,” or make it harder for the boss to play favorites or for shareholders to use the company for personal purposes. So corporate bureaucracy is necessary. Still, because of bureaucracy, corporate life can be tough and also deeply unfair at times. And that too is “the nature of the firm,” to refer back to Ronald Coase’s title. ACKNOWLEDGMENTS The author wishes to thank Tim Bartlett, Christina Cacioppo, Bryan Caplan, Natasha Cowen, Teresa Hartnett, Daniel Klein, Ezra Klein, Randall Kroszner, Timothy Lee, Hollis Robbins, Alex Tabarrok, and Dillon Tauzin for useful comments and discussions and assistance.

The Capitalist Manifesto
by Johan Norberg
Published 14 Jun 2023

But the general disappointment has led to a narrative that is inaccurate on almost every point and, if we embrace it, it could lead to major mistakes both in China and in the West. When China became capitalist To start from the beginning, it is a Communist Party myth that its strategic planning made China rich. On the contrary, as Ning Wang and Nobel laureate Ronald Coase showed in their book How China Became Capitalist, it was a series of popular revolts that created grassroots capitalism and set the entire reform process in motion.1 Hungry farmers began to dismantle collective farming and privatize land in the late 1970s. They wrote secret documents that stated the land would be divided between families, and they promised to raise the children of the villagers who were sent to labour camps if the party ever found out about their conspiracy.

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Even if they could probably make a lot of money on such innovations without prize competitions. It should also be noted that many of the most productive prize competitions have been established privately, such as the X Prize Foundation. 27. ‘The world’s most pointless rocket has been launched at last’, The Economist, 16 November 2022. 7. China, paper tiger 1. Ronald Coase & Ning Wang, How China Became Capitalist, Palgrave MacMillan, 2013. 2. Kate Xiao Zhou, How the Farmers Changed China: Power of the People, Westview Press, 1996, p.56. 3. Coase & Wang 2013, p.63. 4. Barry Naughton, The Rise of China’s Industrial Policy 1978 to 2020, Enero 2021, p.41. 5. Bradley M.

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State
by James Dale Davidson and William Rees-Mogg
Published 3 Feb 1997

They did not address what influences the optimal size of firms, why firms take the form they do, or even why firms exist at all. Why do entrepreneurs hire employees, rather than placing every task that needs doing out to bid among independent contractors in the auction market? Nobel Prize-winning economist Ronald Coase helped launch a new direction in economics by asking some of these important questions. The answers he helped to frame hint at the revolutionary consequences of information technology for the structure of business. Coase argued that firms were an efficient way to overcome information deficits and high transaction costs.26 Information and Transaction Costs To see why, consider the obstacles you would have faced in trying to operate an industrial-era assembly line without a single firm to coordinate its activities.

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"Competitive Territorial Clubs" This is more than merely a theory, as articulated first by economist Charles Tiebout in 1956.30 As economist Fred Foldvary has documented in Public Goods and Private Communities: The Market Provision of Social Services, there is no essential reason that social services and many public goods must be provided by political means. 274 Foldvary's examples, among others, also confirm the controversial theorem of Nobel Prize~winning economist Ronald Coase that "government intervention is not needed to resolve externality issues," such as problems of pollution.31 Entrepreneurs can provide collective goods by market means. Many already do so now in real world communities. Foldvary's case studies show how the privatization of communities can result in new mechanisms for providing and financing public goods and services.32 The Road to Prosperity Microtechnology itself will facilitate new means of financing and regulating the provision of goods heretofore treated as public goods.

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Country: Tom Peters & George Gilder Debate the Impact of Technology on Location," Forbes, February 1995. 18. Weber, op. cit., p.21. 19. Ibid., p.46 for London, p.73 for Paris. 20. Ibid., p.120. 21. Ibid., p.95. 22. Ibid., p.84. 23. Ibid., p.119. 24. Ibid., p.101. 25. Ibid., p.5. 26. See Ronald Coase, "The Nature of the Firm," reprinted in Louis Putterman and Randall S. Kroszner, eds., The Economic Nature of the Firm: A Reader 2nd ed. (Cambridge: Cambridge University Press, 1996), pp.89-104. 27. Quoted by West, op. cit., p.58; see also Oliver E. Williamson, "The Organization of Work: A Comparative Insititutional Assessment," Journal of Economic Behaviour and Organisation, vol.1, no.1. 28.

Radical Uncertainty: Decision-Making for an Unknowable Future
by Mervyn King and John Kay
Published 5 Mar 2020

They cited not only the osotua practices of those Maa speakers in Africa, but the potlatches of native tribes in the American north-west (ceremonies involving massive and sometimes destructive exchanges of gifts), and the modern American – and European – practice of marking a proposal of marriage with a costly engagement ring. The economists found an altogether different explanation for a round of drinks. The practice minimised transaction costs, reducing the number of occasions on which money needed to be handed across the bar, and the frequency with which the bartender made change. They drew an analogy with Ronald Coase’s famous analysis of when it made sense to deal through markets and when it was better to internalise the transaction within the firm. 6 It was an economist, of course, who proposed an empirical test of the alternative hypotheses. What happened if you bought more drinks than had been bought for you?

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Peter Drucker’s 1946 Concept of the Corporation was the first bestselling business book and is still in print and widely read; Alfred Chandler’s Strategy and Structure transformed business history from the hagiographic portrayal of companies and the heroic individuals who led them into the serious academic discipline it is today; and Sloan’s own My Years with General Motors is one of the few autobiographies by a senior executive worth reading. Ronald Coase’s depiction of the theory of the firm, for which he received the Nobel Prize in Economics in 1991, is a thinly disguised account of the General Motors of the inter-war period. The essence of Sloan’s management style was a mixture of a closely knit senior executive group with considerable organisational decentralisation.

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An obvious means of responding to the prior neglect of expectations would have been to undertake empirical work on the beliefs about the future which consumers and those engaged in business and finance actually held, and the processes by which they established and changed such beliefs. But little such research was undertaken. The new macroeconomic theorists instead followed a different approach; Chicago economist Ronald Coase attributed a satirical description of it to the English economist Ely Devons: ‘If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, “What would I do if I were a horse?”’ 7 These theorists – Chicago was and remains a centre of their thinking – followed the dominant paradigm of the universal applicability of subjective probability.

The Wealth of Networks: How Social Production Transforms Markets and Freedom
by Yochai Benkler
Published 14 May 2006

It certainly should not be that these volunteers will beat the largest and best-financed business enterprises in the world at their own game. And yet, this is precisely what is happening in the software world. 120 Industrial organization literature provides a prominent place for the transaction costs view of markets and firms, based on insights of Ronald Coase and Oliver Williamson. On this view, people use markets when the gains from doing so, net of transaction costs, exceed the gains from doing the same thing in a managed firm, net of the costs of organizing and managing a firm. Firms emerge when the opposite is true, and transaction costs can best be reduced by [pg 60] bringing an activity into a managed context that requires no individual transactions to allocate this resource or that effort.

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This engineering technique, adopted by Marconi in 1900, formed the basis of our notion of "spectrum": the range of frequencies at which we know how to generate electromagnetic waves with sufficient control and predictability that we can encode and decode information with them, as well as the notion that there are "channels" of spectrum that are "used" by a communication. For more than half a century, radio communications regulation was thought necessary because spectrum was scarce, and unless regulated, everyone would transmit at all frequencies causing chaos and an inability to send messages. From 1959, when Ronald Coase first published his critique of this regulatory approach, until the early 1990s, when spectrum auctions began, the terms of the debate over "spectrum policy," or wireless communications regulation, revolved around whether the exclusive right to transmit radio signals in a given geographic area should be granted as a regulatory license or a tradable property right.

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FCC, 512 U.S. 622 (1994) and Turner Broad. Sys. v. FCC, 520 U.S. 180 (1997). 164. Chesapeake & Potomac Tel. Co. v. United States, 42 F.3d 181 (4th Cir. 1994); Comcast Cablevision of Broward County, Inc. v. Broward County, 124 F. Supp. 2d 685, 698 (D. Fla., 2000). 165. The locus classicus of the economists' critique was Ronald Coase, "The Federal Communications Commission," Journal of Law and Economics 2 (1959): 1. The best worked-out version of how these property rights would look remains Arthur S. De Vany et al., "A Property System for Market Allocation of the Electromagnetic Spectrum: A Legal-Economic-Engineering Study," Stanford Law Review 21 (1969): 1499. 166.

How to Fix Copyright
by William Patry
Published 3 Jan 2012

Ian Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth, Executive Summary (May 2011). 52. Id. Chapter 10, paragraph 10.7. 53. Id., paragraph 10.10. 54. Id., paragraph 10.6. 55. Media Piracy in Emerging Economies at 16. Ronald Coase similarly pointed out the proper approach is to “compare the total social product yielded by ...different arrangements,” Ronald Coase, The Problem of Social Cost, 3 Journal of Law and Economics 1, 34 (1960). 56. Both charts are taken from this source: http://theunderstatement. com/post/3362645556/the-real-death-of-the-music-industry. 57. Available at: http://yarchive.net/macaulay/copyright.html.

The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion
by John Hagel Iii and John Seely Brown
Published 12 Apr 2010

First, during the Depression in the 1930s, business leaders in major developed economies around the world were motivated to exploit the capabilities of new communication and transportation infrastructures more effectively to harness scalable efficiency and compete during a period of stagnant or declining demand. Second, during the 1950s, another generation of business leaders broadened their horizons to scale push programs beyond national boundaries to take advantage of trade liberalization and to serve global markets. It is no coincidence that the famous British economist Ronald Coase wrote his path-breaking essay, “The Nature of the Firm,” in 1937.4 He effectively captured the primary thrust of institution-building during this period, arguing that firms existed to reduce the transaction costs that made coordinating activity across independent entities difficult. For this insight, he won the Nobel Prize in Economics.

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Chapter 1 1 Timothy Ferris, The Four-Hour Work Week (New York: Crown, 2007). 2 A Gallup poll found that 55 percent of all U.S. employees are bored at least part of the time they’re at work. See Heath Row, “Yawn and Guarded,” Fast Company Member Blog, February 8, 2008, http://www.fastcompany.com/blog/heath-row/yawn-and-guarded. 3 See for instance, Alfred D. Chandler Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge: Harvard University Press, 1994). 4 Ronald Coase, “The Nature of the Firm,” Economica 4, no. 16 (November 1937): 386-405. 5 For more about the role of real-time information in the Saffron Revolution, as well as in other political crises, see Nik Gowing, “‘Skyful of Lies’ and Black Swans: The New Tyranny of Shifting Information Power in Crises,” Reuters Institute for the Study of Journalism, May 2009, http://reutersinstitute.politics.ox.ac.uk/fileadmin/documents/Publications/Skyful_of_Lies.pdf. 6 Ibid. 7 See, for instance, “‘Neda’ Becomes Rallying Cry for Iranian Protests,” CNN, June 22, 2009, http://www.cnn.com/2009/WORLD/meast/06/21/iran.woman.twitter/index.html?

Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism
by Robin Chase
Published 14 May 2015

In total, companies building platforms to tap into excess capacity raised more than $5.5 billion that year, which was close to four times what had been raised by similar companies in 2013, which was again more than double what had been raised in 2012.5 What is happening? The Internet has eliminated a key corporate competitive advantage. In 1937, in the influential essay “The Nature of the Firm,” British economist Ronald Coase wrote that the corporation was invented to do things that individuals and small companies couldn’t do. In particular, small companies would choose to become larger companies whenever it was cheaper to hire than to outsource. What would make hiring cheaper than outsourcing? Transaction costs (a term Coase invented).

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Employers could respond more rapidly to market forces; workers could diversify their income streams and transition from dying industries or boring jobs in an adaptive way that was much more in their control. The “job for life” that was the hallmark of corporate America in the 1950s has been gone for close to two generations. Way back in Chapter 1, I talked about the economist Ronald Coase and his work showing that companies grew bigger in order to avoid transaction costs grounded in lack of information. The corollary to this insight was his prediction that as markets become more efficient because of better information flow, companies will tend to get smaller and smaller. Our platforms are such places, where tiny little companies (often independent contractors) find each other and interact, together creating larger economic processes But in a genuinely efficient platform economy, in which assets and labor flow to the most productive uses, the job-for-life benefits package provided by private companies evaporates.

The Fourth Revolution: The Global Race to Reinvent the State
by John Micklethwait and Adrian Wooldridge
Published 14 May 2014

Oddly, he was employed there by an esoteric outfit called the Committee on Social Thought, but the real center of the counterrevolution against Keynesianism was the economics department. A stream of luminaries hacked away at the status quo: Frank Knight demonstrated that social reform was often counterproductive; Ronald Coase (another LSE import) and George Stigler argued that regulators were frequently captured by the people whom they regulated; Gary Becker invented the economics of human capital; James Buchanan and Gordon Tullock demonstrated that bureaucrats were motivated by the same profit-maximizing instincts as businesspeople.4 But nobody wielded the ax more vigorously than Friedman.

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So many of the things that the state does badly are ones where it is charged with pursuing impossible dreams. The more it fails to meet its impossible targets, the more it resorts to micromanagement to make up for its failures. Examining the problem of why so many government programs are either ineffective or counterproductive, one of the twentieth century’s greatest economists, Ronald Coase, put it this way: An important reason may be that government at the present time is so large that it has reached the stage of negative marginal productivity, which means that any additional function it takes on will probably result in more harm than good. . . . If a federal program were established to give financial assistance to Boy Scouts to enable them to help old ladies cross busy intersections, we could be sure that not all the money would go to Boy Scouts, that some of those they helped would be neither old nor ladies, that part of the program would be devoted to preventing old ladies from crossing busy intersections, and that many of them would be killed because they would now cross at places where, unsupervised, they were at least permitted to cross.

Bourgeois Dignity: Why Economics Can't Explain the Modern World
by Deirdre N. McCloskey
Published 15 Nov 2011

An embattled countersquad of economic thinkers, with quite varied politics, has in the twentieth century included Joseph Schumpeter, Ludwig von Mises, Friedrich Hayek, Thorstein Veblen, John R. Commons, John Maynard Keynes, John H. Clapham, Frank Knight, Eli Heckscher, Gunnar Myrdal, Antonio Gramsci, Luigi Einaudi, Joan Robinson, Kenneth Boulding, Ronald Coase, Paul Sweezy, Alexander Gerschenkron, John Kenneth Galbraith, George Shackle, Robert Heilbroner, Theodore Schultz, Albert Hirschman, Bert Hoselitz, Bruno Leoni, Noel Butlin, James Buchanan, Thomas Schelling, Robert Fogel, Amartya Sen, Elinor Ostrom, Israel Kirzner, and Vernon Smith. They practice what could be called (Adam) Smithian economics, or what has lately been called “humanomics.”

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And they are, conservatively measured, thirty times richer than their ancestors were in what was in 1800 one of the poorest countries in Europe.11 * Material growth in goods and services is not the only relevant sign of allocates the Great Enrichment. The word “enrichment” has a highly relevant secondary meaning of spiritual growth.12 As the economists Ronald Coase and Ning Wang put it in their peroration to How China Became Capitalist (2013), “When the markets for goods and the market for ideas are together in full swing, each supporting, augmenting, and strengthening the other, human creativity and happiness stand the best chance to prevail, and the material and spiritual civilizations march on firm ground, side by side.”13 Many of the clerisy on the left and on the right lament the mass character of modern society, agreeing for example with the leftish Australian economist Geoffrey Harcourt, who wrote in 1994 that trade-tested betterment has stunted “the Christian (and humanist) virtues of altruism, cooperation, tolerance, compassion.”

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As Montesquieu put it in 1748, “Other nations have made the interests of commerce yield to those of politics; the English, on the contrary, have ever made their political interests give way to those of commerce.”8 In truth not “ever,” but by 1748, often. The Chinese nowadays say that before 1978 the Communist cadres talked only of class war, but after 1978 they talked only of economic success. “‘Seeking truth from facts’ became the Party’s new guideline,” Ronald Coase and Ning Wang observe. “Getting rich became glorious.”9 The post-1978 mottoes of the Chinese Communist Party echo in a discordant key the empiricism, liberty, and dignity that was newly popular in northwestern Europe after about 1700. Europe went from talking only about God and hierarchy to talking only about the economy and national strength.

The Quest: Energy, Security, and the Remaking of the Modern World
by Daniel Yergin
Published 14 May 2011

Amber Leonard, eds., Negotiating Climate Change: The Inside Story of the Rio Convention (Cambridge: Cambridge University Press, 1994), ch. 1, appendix (“dangerous anthropogenic interference”). 28 Interview with William Reilly. Chapter 24: Making a Market 1 Michael Sandel, “It’s Immoral to Buy the Right to Pollute,” op-ed, New York Times, December 17, 1997; interview with Fred Krupp. 2 Ronald Coase autobiography, Nobel Prize Web site (“underrate your abilities”). 3 Ronald Coase, “The Problem of Social Cost,” Journal of Law and Economics, vol. 3, (1960), pp. 1–44 (“externalities”). 4 John H. Dales, Pollution, Property & Prices: An Essay in Policy-making and Economics (Toronto: University of Toronto Press, 1968), ch. 6; David Montgomery, “Markets in Licenses and Efficient Pollution Control Programs,” Journal of Economic Theory 5, no. 3 (1972), pp. 395–418. 5 Richard Nixon, “Message to the Congress,” August 10, 1970 (“war on pollution”); Robert W.

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It goes back to what John Maynard Keynes called the “academic scribblers”—those who come to influence subsequent politicians and lawmakers and “practical men” in general—none of whom have any idea that they are channeling thinkers they had never heard of in the first place. THE “SCRIBBLER IN CHIEF” In this case, there was even a “scribbler in chief”—Ronald Coase. Yet Coase would have seemed a most unlikely candidate for this post. Born in 1910, he suffered as a child from “weakness” in his legs, thought to be polio, as a result of which he had initially been put into classes for physically and mentally handicapped children. He managed to learn to read only by studying the labels on bottles of medicine.

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Prescott recognized that Eizenstat would not budge, and reluctantly agreed to the central role of trading. With that, the Kyoto Protocol was effectively done and negotiated, the carpenters could continue, and the follow-on conference could move into the hall.27 And that it is how, in the little green room on the last day in Kyoto, “markets” became embedded in climate change. Ronald Coase’s theorem, and John Dales’s refining of it into a “market for pollution rights,” had become international policy. And, if one were looking for confirmation of Keynes’s theory about the impact of “scribblers” on people who had never heard of them, then Kyoto—including the deal made in the green room—was a prime example.

Mine!: How the Hidden Rules of Ownership Control Our Lives
by Michael A. Heller and James Salzman
Published 2 Mar 2021

Today nuisance law is a mess—its tests are mushy and unpredictable. What’s reasonable to me may be an outrage to you. The question What is reasonable? has no objective, value-free answer. We seem caught between a rock and a hard place, between trees and sun. There’s an alternative law and economics approach, building on three insights by Ronald Coase, a Nobel Prize–winning economist. First, he noted, resource conflicts are always reciprocal—growing trees and installing solar panels are both ordinary uses; the problem arises only because they are next to each other. Asking if it’s unreasonable to plant trees that shade a neighbor’s solar panels misses the point that each use injures the other.

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British courts even developed: Sara Bronin, “Solar Rights,” Boston University Law Review 89 (2009): 1258. “would preclude development”: Hadacheck v. Sebastian, 239 U.S. 394 (1915). Nuisance law prohibits you from maintaining: Thomas Merrill, “Trespass, Nuisance, and the Costs of Determining Property Rights,” Journal of Legal Studies 14 (1985): 13–48. law and economics approach: Ronald Coase, “The Problem of Social Cost,” Journal of Law and Economics 3 (1960): 1–44. Asking these questions: The four-part framework we set out here was introduced in the canonical piece by Guido Calabresi and Douglas Melamed, “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral,” Harvard Law Review 85 (1972): 1089–1128.

A Pelican Introduction Economics: A User's Guide
by Ha-Joon Chang
Published 26 May 2014

With new labour laws that strengthen worker rights, land reform that reduces the supply of cheap labour to factories (as more people stay in the countryside) or industrial policies that create high-skilled jobs, the choice for workers can be between low-wage jobs and higher-wage ones, rather than between low-wage jobs and no jobs. The Neoclassical school’s focus on exchange and consumption makes it neglect the sphere of production, which is a large – and the most important, according to many other schools of economics – part of our economy. Commenting on this deficiency, Ronald Coase, the Institutionalist economist, in his 1992 Nobel Economics Prize lecture, disparagingly described Neoclassical economics as a theory fit only for the analysis of ‘lone individuals exchanging nuts and berries on the edge of the forest’. The Marxist School One-sentence summary: Capitalism is a powerful vehicle for economic progress, but it will collapse, as private property ownership becomes an obstacle to further progress.

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Social institutions and the structure they create were everything; individuals were seen as being totally determined by the society they live in – ‘there is no such thing as an individual’, infamously declared Clarence Ayres, who dominated the (declining) Institutionalist school in the US in the early post-Second World War period. Transaction costs and institutions: the rise of the New Institutional Economics From the 1980s, a group of economists with Neoclassical and Austrian leanings – led by Douglass North, Ronald Coase and Oliver Williamson – started a new school of institutional economics, known as the New Institutional Economics (NIE).23 By calling themselves institutional economists, the New Institutionalist economists made it clear that they were not typical Neoclassical economists, who looked at only individuals but not the institutions that affect their behaviour.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

However, the drive to offshore outsource manufacturing in the advanced economies, which was mutually symbiotic with the frustration of capital controls, was clearly a function of neoliberal doctrines concerning the unbounded benefits of freedom of international trade, combined with neoliberal projects to reengineer the corporation as an arbitrary nexus of contractual obligations, rather than as a repository of production expertise. The MPS member Anne Krueger was brought into dialogue with her fellow member Ronald Coase, and the offspring was the flight of capital to countries such as China, India, and the Cayman Islands. The role of China as beneficiary, but simultaneously as part-time repudiator of the neoliberal globalized financial system, is a question that bedevils all concerned. While freedom of capital flows have not generally been stressed by neoliberals as salient causes of the crisis, they do manage to unite in opposition to capital controls as one reaction to the crisis

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Furthermore, professional economists are brought in to shill for this strategy, largely because they enjoy conflicts of interest in this area of a magnitude commensurate with those they have nurtured with the financial sector in general. The neoliberal genealogy of this approach is conventionally traced back to the MPS member Ronald Coase, who first proposed that pollution could be optimized by submitting it to a market calculus.22 The chequered history of traded carbon permits and their mind-numbing technicalities of the ways in which these markets were foisted upon well-meaning reformers has been explained in a number of excellent papers by Larry Lohmann, which deserve to be much better known among environmentalists and the left in general.

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Bernanke, Ben on asset purchase program Brunnermeier on as Chairman of Federal Reserve Bank Board on CRA on economic crisis as economic influence on EMH on Friedman on Great Moderation on Great Recession “hold-to-maturity” prices Kestenbaum on on Lehman failure Mirowski on on mortgage market on “Panic of 2007” paper pronounced absolution upon orthodox economics profession shadow banking on TARP testimony before FCIC Bernard, Andrew Bernstein, Jared Bertelsmann AG Besley, Tim Bhagwati, Jagdish Big Lie The Big Short (Lewis) The Birth of Biopolitics (Foucault) Black Rock Black-Scholes option pricing Blackstone Group Blackwater (Scahill) Blanchard, Olivier Blinder, Alan Bloomberg, Michael Bockman, Johanna, Markets in the Name of Socialism Body Alteration Boettke, Peter Bookstaber, Richard Bootle, Roger Born, Brooksley Boskin, Michael Bradley Foundation “Break the Glass: Bank Recapitalization Plan” (Swagel) Brenner, Robert Bretton Woods Bristol University British Academy British National Health Service British Royal Society Brookings Institution Brooks, David Brown, Gordon Brown, Wendy Brunnermeier, Markus Buchanan, James Buiter, Willem Bulow, Jeremy Bush, George Business Week Buycott C Calabria, Mark Caldwell, Bruce Calomiris, Charles Calvo, Guillermo Cambridge University Cameron, David Campbell, John Capitalism and Freedom (Friedman) Carbon emission permits Cassano, Joseph Cassidy, John Cato Institute CDS (Credit Default Swap) Center for Audit Quality Center for Market Processes at GMU Center for the Dissemination of Economic Information CETUSA (Council for Educational Travel in the USA) CFPB (Consumer Financial Protection Bureau) Change.org Chari, V. V. Charles G. Koch Charitable Foundation Check ’n’ Go Chicago Law School Chicago Mercantile Exchange Chicago School, China Christian Scientists Citigroup Clarida, Richard Clark, Greg Class denial Clemson Clinton, Bill Clower, Robert Coase, Ronald Coase Theorem Cochrane, John CoCo bonds Coffee Colander, David Colbert, Stephen The Colbert Report (TV show) Cold War Columbia University Comitato Addiopizzo Commodities Corporation Commons, John Community Reinvestment Act (1977) Competitive Enterprise Institute Complexity Conflicts of interest in economics Congress Congressional Budget Office Constant, Benjamin The Constitution of Liberty (Hayek) Consumer, Credit and Neoliberalism (Payne) Consumer Financial Protection Bureau (CFPB) Cooper, Melinda Corporate Warriors (Singer) Council for Educational Travel in the USA (CETUSA) Council of Economic Advisors Council of Trent Council on Foreign Relations Countrywide Cowen, Tyler Cox, Christopher Craigslist Cramton, Peter, “Credit Scores,” Credit Suisse Crisis as intellectual disarray Crooked Timber (blog) Crouch, Colin Cuomo, Andrew Curtis, Adam D “Dahlem report,” Daly, Herman Dark Pools (Patterson) Darwinism Davidson, Paul Davidson, Peter Davies, Will Davis, Jared D.C.

With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough
by Peter Barnes
Published 31 Jul 2014

If a declining quantity of pollution rights were issued and farmers could trade them, Dales argued, farmers themselves would find the cheapest ways to cut their pollution. Economists, if not farmers, picked up the idea and started applying it, conceptually, to other forms of pollution. In doing this, they were influenced not just by Dales but also by Nobel Prize—winning economist Ronald Coase, who in an oft-quoted paper, “The Problem of Social Cost,” argued that property rights could solve the problem of externalities without government regulation.2 (Coase was part of the University of Chicago school of thought, which holds that markets do almost everything better than government.) In 1990, the idea made its way into national legislation.

Smarter Than You Think: How Technology Is Changing Our Minds for the Better
by Clive Thompson
Published 11 Sep 2013

To organize a widespread group around a task in the pre-Internet period, you needed a central office, staff devoted to coordinating efforts, expensive forms of long-distance communication (telegraphs, phone lines, trains), somebody to buy pencils and paper clips and to manage inventory. These are known as transaction costs, and they’re huge. But there was no way around them. As Shirky points out, following the analysis of economist Ronald Coase’s 1937 article “The Nature of the Firm,” you either paid the heavy costs of organizing or you didn’t organize at all and got nothing done. And so for centuries, people collaborated massively only on tasks that would make enough money to afford those costs. You could work together globally at building and selling profitable cars (like the Ford Motor Company) or running a world religion (like the Catholic Church), or even running a big nonprofit that could solicit mass donations (like UNICEF).

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—they are engaging in the same collective decision making that was previously available only to well-funded organizations. This, again, is basic behavioral economics: If you make it easier for people to do something, they’ll do more of it. Finding your way around Skyrim or resolving conundrums like “Which movie are we seeing tonight?” are problems that traditionally couldn’t afford Ronald Coase–style transactional costs—they fell “under the Coasean floor,” as Shirky puts it. But things have decisively changed. “Because we can now reach beneath the Coasean floor,” he writes, “we can have groups that operate with a birthday party’s informality and a multinational’s scope. . . . Now that group-forming has gone from hard to ridiculously easy, we are seeing an explosion of experiments with new groups and new kinds of groups.”

Six Degrees: The Science of a Connected Age
by Duncan J. Watts
Published 1 Feb 2003

To cut a (very) long story short, the most generally agreed-upon economic theory of industrial organization essentially divides the world between hierarchies and markets. Firms, it claims, exist because markets in the real world suffer from a set of imperfections that the Nobel Prize–winning economist Ronald Coase called transaction costs. If everyone could discover, draw up, and enforce market-based contracts with everyone else (if we could all be independent contractors, for example), then the immense flexibility of market forces would effectively eliminate the need for firms entirely. But in the real world, as we have already seen in a number of contexts, information is costly to discover and hard to process.

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The Wealth of Nations (University of Chicago Press, Chicago, 1976). A precursor to Coase’s theory of transaction costs was Frank Knight’s claim that firms exist to reduce uncertainty: Knight, F. H. Risk, Uncertainty, and Profit (London School of Economics and Political Science, London, 1933). And Ronald Coase’s original argument of transaction costs as the basis for the firm is explicated in Coase, R. The nature of the firm. Economica, n.s., 4 (November 1937). Several decades later, Coase is still trying to get his ideas accepted by mainstream economics. His latest attempt is Coase, R. The Nature of the Firm (Oxford University Press, Oxford, 1991).

The Code of Capital: How the Law Creates Wealth and Inequality
by Katharina Pistor
Published 27 May 2019

Made in Law The account of how land has been coded as capital offered here differs from conventional accounts that portray property rights as the quintessential institution for economic prosperity.75 For economists, the major purpose of property rights is to align the interests of the owner with the most cost-efficient use of the asset. Optimizing the use of assets was what animated Ronald Coase’s famous example of two neighboring farmers, one herding cows, the other trying to grow crops, which of course the cows eat or trample over.76 There are many solutions to this problem of conflicting interests; one of the two farmers might build a fence, move the crops elsewhere, start herding cows, or the other might pay for damages or switch from cattle to crops himself.

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Nick Szabo, a prominent voice in the world of cryptocurrency, who may be best known for his work on digital contracts, explored how to create property rights in the digital space.21 He explained that property rights are “a defined space, whether a namespace or physical space,” that marks the scope of control rights an owner can exercise. Once the initial allocation is coded in digits, there will no longer be any doubt as to who owns what, because all claims will be recorded on tamper-proof digital code. This demonstrates how important the initial allocation of property rights is, a point Ronald Coase made half a century ago.22 Szabo restates Coase’s insight by emphasizing that it is critical to “agree on simple attributes of or rights to control subdivisions of that space.”23 Only after this initial allocation has been made can transactions occur and blockchain (or similar) technology be used to verify each subsequent transaction.

Seasteading: How Floating Nations Will Restore the Environment, Enrich the Poor, Cure the Sick, and Liberate Humanity From Politicians
by Joe Quirk and Patri Friedman
Published 21 Mar 2017

The Ming dynasty fortified the Great Wall to keep out foreigners, created a new capital known as “the Forbidden City” to keep out its own people, and ordered that the most advanced fleet of ships in the world be burned, enforcing a self-serving siege mentality that cemented Chinese stagnation. By 1961, tens of millions had starved to death. How did China reverse this trend and become an economic powerhouse? Nobel laureate Ronald Coase and Ning Wang, in their essay “How China Became Capitalist,” suggest that once the monopoly held by central planners was broken, the solution arose from a vast market of competitive governance: “When China’s 32 provinces, 282 municipalities, 2,862 counties, 19,522 towns, and 14,677 villages threw themselves into an open competition for investment and for good ideas of developing the local economy, China became a gigantic laboratory where many different economic experiments were tried simultaneously.

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Turchin, “Why Europe Is Not China,” September 29, 2012, https://evolution-institute.org/blog/why-europe-is-not-china. “Any man of genius is paralyzed”: D. S. Landes, The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (New York: W. W. Norton, 1998), 342. “When China’s 32 provinces, 282 municipalities”: Ronald Coase and Ning Wang, “Policy Report: How China Became Capitalist,” on the website of the Cato Institute, February 15, 2013, www.cato.org/policy-report/januaryfebruary-2013/how-china-became-capitalist. Chapter 10. FLOW STATES: How to Double Global Wealth Trade carried by sea has quadrupled since 1970: International Maritime Organization, International Shipping, Carrier of World Trade, background paper, 2005.

Green Philosophy: How to Think Seriously About the Planet
by Roger Scruton
Published 30 Apr 2014

This was how the notorious case of the Exxon-Valdez oil spill on the Alaskan coast was resolved, with Exxon compelled to assume the costs of restoring a precious habitat to its previous condition.172 The comparable case of the 2010 BP spill in the Gulf of Mexico was dealt with similarly, with BP admitting liability, and preparing to meet costs that may very well exhaust its reserves. The contrast with the nuclear disasters in the Soviet Union, in which the state neither assumed liability nor even admitted that the disasters had occurred, is striking. In a famous argument the economist Ronald Coase suggested that damages in tort and contract provide the feedback that, in the absence of transaction costs, overcomes of its own accord the problem posed by externalities.173 Coase was opposing the widely accepted view of Arthur Cecil Pigou, that state action is necessary to ensure that the costs of market transactions are internalized by those who create them.174 Pigou’s suggestion was that pollution and similar externalities should be taxed, so restoring the incentive to assume the costs of market transactions along with the benefits.

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Stockport Metropolitan Borough Council, [2003] UKHL 61, qualifying the rule in Rylands v. Fletcher. 171 See George L. Priest, ‘The Invention of Enterprise Liability: A Critical History of the Intellectual Foundations of Modern Tort Law’, Journal of Legal Studies, 14.3, December 1985, pp. 461–528. 172 DeMuth and Ginsburg, op. cit., p. 25. 173 See especially Ronald Coase, ‘The Problem of Social Cost’, Journal of Law and Economics, 3, October 1960. 174 A. C. Pigou, The Economics of Welfare, London, 1920, part 2. Pigou’s solution was accepted by Garrett Hardin, in his original response to ‘the tragedy of the commons’. Later he became more ‘Coasey’. 175 Coase’s Theorem is also insensitive to the so-called ‘endowment effect’, according to which the receipt of property is in itself a value to the recipient.

Hacking Capitalism
by Söderberg, Johan; Söderberg, Johan;

The advantage of FOSS businesses is partly that they are closely allied with free market forces, partly that they are integrated into a network that includes the hacker community. In recent years, the law professor Yochai Benkler has come forward as the chief interpreter of the FOSS development model in terms of a networked mode of production. In his view the network is distinct from both the market and firm. Benkler’s argument builds on the theories of the economist Ronald Coase. In 1937, Coase put his finger on the fact that the agents operating on the free market were firms. The existence of firms contradicts the market principle since the firm has internally dissolved the price mechanism. It runs counter to the assumption in economic theory that markets are prevalent because they are the most efficient method to organise economic interactions.

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The idea that networks is a novel mode of organising businesses and that it is distinct from markets has been in vogue since the 1990s. According to the argument, networks are supposed to be superior for sharing tacit know-how, in adapting to a volatile environment, and for perpetual learning processes.8 Unfortunately, Yochai Benkler’s decision to follow Ronald Coase and confine himself to an analysis of transaction costs puts a limitation on his thinking. The observations on networks ought instead to be framed in the debate about markets versus central planning that was waged between neoclassical and socialist economists in the first half of the twentieth century.

The Power Law: Venture Capital and the Making of the New Future
by Sebastian Mallaby
Published 1 Feb 2022

Next-generation cars did not come from GM and Volkswagen; they came from another Musk company, Tesla. “I can’t think of a single, major innovation coming from experts in the last thirty, forty years,” Khosla exclaims. “Think about it, isn’t that stunning?” If the future is best discovered by means of maverick moon shots, another insight follows. Thanks to the work of the Nobel laureate Ronald Coase, the economics profession has long recognized two great institutions of modern capitalism: markets, which coordinate activity via price signals and arm’s-length contracts; and corporations, which do so by assembling large teams led by top-down managers. But economists have focused less on the middle ground that Khosla inhabits: the venture-capital networks that lie somewhere between markets and corporations.

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Because of this periodic submission to the discipline of price signals, venture capitalists are good at recognizing failure and good at doubling down on early indicators of success. Their blend of corporate strategizing and respect for the market represents a third great institution of modern capitalism, to be added to the two that Ronald Coase emphasized. The underappreciated significance of venture-capital networks has become especially glaring in the past few years as the industry has expanded in three dimensions. First, it has spread beyond its historical stronghold in Silicon Valley, building thriving outposts in Asia, Israel, and Europe as well as in major U.S. cities.[34] Second, the industry has spread sectorially, colonizing new industries as venture-backed technologies reach ever more widely, touching everything from cars to the hotel business.

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Lately, however, the more pressing question is why some regions within countries leave other regions so far behind as innovation hubs and generators of prosperity. It has long been obvious that one area can outperform others, as Silicon Valley has done; but the rule of law and price stability cannot explain why the Valley is more innovative than Montana or Michigan.[39] To understand the Valley’s secret, we need to update Ronald Coase’s framework: we must study venture-capital networks as deeply as we study markets and corporations. In a world of intensifying geoeconomic competition, the countries with the most creative innovation hubs are likely to be the most prosperous and ultimately the most powerful. In a world of intensifying income inequality, the countries that can foster greater regional diversity in the locations of those hubs will be happier and more stable.

State-Building: Governance and World Order in the 21st Century
by Francis Fukuyama
Published 7 Apr 2004

Some economists, recognizing the limitations of their approach, are now returning to these earlier theories and trying to restate them in terms of their own methodological assumptions. They are in effect reinventing a forty- to fifty-year-old wheel, which they were responsible for forgetting how to use. Institutional Economics and the Theory of Organizations Economic theories about organizations1 begin with Ronald Coase’s (1937) theory of the firm, which established the basic For overviews of the intellectual history of the economists’s approach to organizational theory, see Furubotn and Richter (1997, chapter 8) and Moe (1984). 1 46 state-building distinction between markets and hierarchies and argued that certain resource allocation decisions were made within hierarchical organizations because of a need to economize on transaction costs.

The Master Switch: The Rise and Fall of Information Empires
by Tim Wu
Published 2 Nov 2010

By combining related functions, the integrated entity can prevent rivals from depriving it of some essential component, as for instance when the Hollywood studios acquired movie theaters to prevent theater owners from shutting out studio products. Interesting, but beyond the scope of this book, is whether this defense function suggests an alternative explanation to the prevailing theory of the firm as shaped by the relative efficiency of internal and external contracting, which the economist Ronald Coase articulated in 1937. † Technically, this is achieved by placing a “robots.txt” file on the root directory of the Web server in question. Google, for its part, could ignore the robots.txt files; in the United States that would foreground an unsettled copyright question, namely, whether expressly involuntary indexing is copyright infringement

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The issues surrounding the Zenith decision and the subsequent formation of the FRC in 1927 are highly contested and subject to numerous interpretations. In contemporary accounts the Radio Act was promoted as a beneficent government response to industry “chaos”; the first to challenge this view, as a normative matter, was the economist Ronald Coase. R. H. Coase, Journal of Law and Economics vol. 2 (October 1959), 1–40. As a descriptive matter, the communications historian Robert McChesney’s groundbreaking 1993 book Telecommunications, Mass Media, and Democracy was among the first to present a highly critical history of the 1927 act, General Order 40, and all that followed—presenting the act as essentially a triumph of large corporate broadcasters.

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

Thereafter, he retreated into pure theory, publishing articles and books at regular intervals, but largely withholding public comment on the progress of the Keynesian revolution. In 1943, Pigou gave up his university professorship, retaining his fellowship at King’s. Thereafter, he retreated to his rooms and books, emerging rarely. In 1960, a year after Pigou’s death, Ronald Coase, a conservatively inclined British economist who had moved to the University of Chicago, questioned whether the presence of spillovers justified government intervention. In a paper entitled “The Problem of Social Cost,” Coase pointed out that, in most cases, the problem came down to an issue of conflicting property rights.

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Citigroup Associated First Capital purchased by compensation of CEOs of credit default swaps of dereguation and disaster myopia of Federal Reserve and government safety net for reduction in assets of risk-management system at shadow banking system and suprime mortgage securities issued by Citron, Bob City College classical economics new Clayton Antitrust Act (1914) climate change Clinton, Bill CLSA Emerging Markets CNBC television network Coase, Ronald Coase theorem Cobden, Richard Coca-Cola Corporation Cohen, Jonathan collateralized debt obligations (CDOs) collateralized mortgage obligations (CMOs) Columbia Broadcasting System (CBS) Columbia University Earth Institute Columbine massacre Columbus, Christopher Commerce Department, U.S.

Adam Smith: Father of Economics
by Jesse Norman
Published 30 Jun 2018

“I imagine,” said [Smith], “that you have got that fine story out of some of the magazines. If any thing can be lower than the Reviews, they are so… As to Mr. Burke, he is a worthy honest man. He married an accomplished girl, without a shilling of fortune.”’ Smith as the hinge of economic modernity: compare Ronald Coase in his bicentennial lecture: ‘What Adam Smith did was to give economics its shape… From one point of view the last two hundred years of economics have been little more than a vast “mopping up operation” in which economists have filled in the gaps, corrected the errors and refined the analysis of The Wealth of Nations’.

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Minsky in John Maynard Keynes, McGraw-Hill [1975] 2008 Different definitions of economics: as ‘the science which studies human behaviour as a relationship between given ends and scarce means’, see Lionel Robbins, An Essay on the Nature and Significance of Economic Science, Macmillan 1932; as the study of incentives, see Steve Levitt and Stephen Dubner, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, HarperCollins 2005 Centrality of institutions to economic life: for the firm as economic institution, see Ronald Coase, ‘The Nature of the Firm’, Economica, 4.16, 1937. More widely, see e.g. Douglass North, ‘Institutions’, Journal of Economic Perspectives, 5.1, Winter 1991, which includes North’s own sketch of a stadial history of market evolution, and analysis of non-evolution. For an argument that economic ideology has corrosive effects on institutions, see Stephen Marglin, The Dismal Science: How Thinking Like an Economist Undermines Community, Harvard University Press 2008 Smith and Marx: see e.g.

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas
by Janek Wasserman
Published 23 Sep 2019

Lindbeck’s intervention on the Nobel committee ushered in a more ideological phase in the prize’s history, during which neoliberal economists, many associated with the MPS, received a large number of the prizes. These included Hayek, Milton Friedman (1976), George Stigler (1982), James Buchanan (1986), Maurice Allais (1988), Ronald Coase (1991), and Gary Becker (1992).6 Even if 1974 was a remarkable year, we should not overstate its singularity. Hayek’s reputation in economics may have stood at low ebb with professional economists, but his general intellectual reputation was sound. The Nobel press release belied the narrative of neglect and rediscovery: “Hayek’s ideas and his analysis of the competence of economic systems were published in a number of works during the forties and fifties and have, without doubt, provided significant impulses to this extensive and growing field of research in comparative economic systems.

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As Steven Horwitz has put it, Austrians always “took account of the puzzles that were of interest to the economics profession and aimed their explanations of those puzzles at that audience of their professional peers.” The first issue of RAE addressed monetarism and Keynesianism. In subsequent years, discussions on public choice, macroeconomics, game theory, and experimental economics filled the pages of RAE and Advances in Austrian Economics. Austrians sparred with Nobelists like Milton Friedman, Ronald Coase, James Buchanan, and Douglass North. They reveled in taking apart the arguments of intellectual allies and opponents alike. As the economist Deirdre McCloskey has noted, her conversion to an appreciation of the role of rhetoric in economic thought had a Viennese accent: “I learned from Don [Lavoie] and Karen Vaughn and Jack High as exemplars that Austrian economics was not merely a pointlessly vicious doctrinal war against one’s natural allies carried out on the field of German texts. . . .

American Secession: The Looming Threat of a National Breakup
by F. H. Buckley
Published 14 Jan 2020

For half of the last forty years, a separatist government has been in power in Quebec. The issue is off the table for the moment, in large part because Canadians are good and sick of it. But it has diverted attention from other things the government might have been doing, and that’s a cost. The same kind of cost arises in private law bargaining, and the Nobel laureate Ronald Coase gave it a name: transaction costs. These are the costs, in both the direct expenses of bargaining and the distraction from other opportunities, incurred when the parties negotiate to reach an agreement. The costs are greater when more parties must be joined in the agreement, because there will generally be a few malcontents and holdouts when the number of parties exceeds five or six.

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism
by Jeremy Rifkin
Published 31 Mar 2014

More traditional advocates of free enterprise recognized that public goods—especially those that constitute infrastructure—were non-rivalrous, and in those instances the average cost of bringing additional units to market continued to decline with prolonged demand. Charging for “declining average cost,” they argued, was more sensible, allowing firms to recoup their investment while keeping the government’s hands off the economic life of the nation. In 1946, economist Ronald Coase stepped into the fray, taking exception to Hotelling’s thesis by arguing that the social subsidies Hotelling advocated “would bring about a maldistribution of the factors of production, a maldistribution of income, and probably a loss similar to that which the scheme was designed to avoid.”5 Coase did not disagree with Hotelling that price should equal marginal cost, but he also believed that the total cost needed to be covered.

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He reasoned that a government willing to undertake such an enterprise is, for the same reasons, ready to build other dams in other and widely scattered places, and to construct a great variety of public works. Each of these entails benefits which are diffused widely among all classes. A rough randomness in distribution should be ample to ensure such a distribution of benefits that most persons in every part of the country would be better off by reason of the program as a whole.45 Ronald Coase didn’t buy Hotelling’s arguments. Recall that Coase, a free-market advocate, didn’t think government was a good prognosticator of consumer demand, even in the case where the public good or service in question was undeniably something everybody needed. He wrote, “I do not myself believe that a government could make accurate estimates of individual demand in a regime in which all prices were based on marginal costs.”46 Coase’s first argument, on closer scrutiny, appears rather spurious.

The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey
by Michael Huemer
Published 29 Oct 2012

Each of these regulations is a command backed up by a threat of force issued by the state against its citizens. While some of these threats may be justified, those that are not constitute a violation of the rights of all those who are thereby coerced. Second, a surplus of laws can have large economic costs. Ronald Coase, Nobel laureate and former editor of the Journal of Law and Economics, reports that his journal published a series of empirical studies of the effects of a wide variety of regulations, in which it turned out that every regulation studied had overall negative effects on society.15 The Small Business Administration of the U.S. government has estimated the annual cost of federal regulations to the U.S. economy at $1.75 trillion, a burden that they find falls disproportionately on small businesses.16 Third, an excessive quantity of law, as well as an excessively complex and technical body of law, renders it unreasonable to demand that citizens know, understand, and follow all laws.

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A Critique of John Rawls’s Theory’, American Political Science Review 69: 594–606. Hart, H. L. A. 1955. ‘Are There Any Natural Rights?’ Philosophical Review 64: 175–91. ——. 1958. ‘Legal and Moral Obligation’ in Essays in Moral Philosophy, ed. A. I. Melden. Seattle: University of Washington Press. Hazlett, Thomas W. 1997. ‘Looking for Results’ (interview with Ronald Coase), Reason 28, 8: 40–6. Henig, Ruth. 1995. Versailles and After: 1919–1933, second edition. London: Routledge. Herring, George C. 2002. America’s Longest War: The United States and Vietnam, 1950–1975, fourth edition. Boston: McGraw-Hill. Heywood, Andrew. 1992. Political Ideologies: An Introduction.

The Case Against Education: Why the Education System Is a Waste of Time and Money
by Bryan Caplan
Published 16 Jan 2018

Government Education Spending in Perspective Sources: Figure 7.1, and Office of Management and Budget 2014, pp. 57–58. Cutting Education: Why, Where, How When once asked at a public lecture in St. Louis how large the state should be, Coase answered: “If you see a man who weighs over 400 pounds, and you ask me how much he should weigh, my answer would be . . . less.” John Nye, “Ronald Coase: An Appreciation”18 When I argue education is largely wasteful signaling, most listeners yield. Popular resistance doesn’t kick in until I add, “Let’s waste less by cutting government spending on education.” You might think conceding the wastefulness of education spending would automatically entail support for austerity, but it doesn’t.

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In Science for the Twenty-First Century: The Bush Report Revisited, edited by Claude Barfield, 81–94. Washington, DC: American Enterprise Institute. Nobel Prize. 2015. “A. Michael Spence—Facts.” Accessed November 15. http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2001/spence-facts.html. Nye, John. 2014. “Ronald Coase: An Appreciation.” Independent Review 19 (1): 101–8. Obukhova, Elena. 2012. “Motivation vs. Relevance: Using Strong Ties to Find a Job in Urban China.” Social Science Research 41 (3): 570–80. Obukhova, Elena, and George Lan. 2013. “Do Job Seekers Benefit from Contacts? A Direct Test with Contemporaneous Searches.”

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

‘There can’t have been many house guests where Milton would have been accused of being too pro-government and too left wing.’ That particular night Director hosted twenty dinner guests, largely conservative thinkers, including not just Friedman but George Stigler, who would go on to make a name for himself attacking government regulation, the British economist Ronald Coase and a fire-breathing conservative lawyer called Robert Bork.1 The University of Chicago in those days was a bear pit, an arena of intense macho intellectual combat where academics were constantly struggling to outdo each other with clever theories about efficient markets – theories that often perched on toe-curling assumptions – to adopt unconventional, even anti-social positions usually supporting big business and attacking big government.

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His messianic zeal mesmerised many of his students. One was Bork, who commented, ‘Aaron gradually destroyed my dreams of socialism with price theory,’ adding that many of his colleagues ‘underwent what can only be called a religious conversion’.2 The guests that evening were there to listen to Ronald Coase present a draft paper, The Problem of Social Cost. At the start of the evening Coase summarised his argument and a vote was taken. All twenty guests opposed him, and Stigler remembered wondering ‘how so fine an economist could make such an obvious mistake’. Coase deployed a novel argument. Corporations in those days were supposed to be subject to the law – or at least the law came first.

The Second Curve: Thoughts on Reinventing Society
by Charles Handy
Published 12 Mar 2015

Size is all-important so the leader effectively freezes out, or buys out, all would-be competing businesses. Anti-trust laws do not seem to apply where there are no competitors to collude with and regulators seem reluctant or unable to interfere. In America the government once split up AT&T. Why not the new giants? Big may be seductive but is it necessary or sensible? Back in the 1930s Ronald Coase argued the case for the large corporation. Keeping everything in-house, he suggested, lowered the transaction costs when compared with negotiating with separate outside businesses. Put simply, if you employed them you could tell them what to do. The result of applying the Coase argument was the integrated organisation, where everything connected with the output of the organisation was both owned and managed by it.

Private Government: How Employers Rule Our Lives (And Why We Don't Talk About It)
by Elizabeth S. Anderson
Published 22 May 2017

It does not explain, for example, why employers continue to have authority over workers’ off-duty lives, given that their choice of sexual partner, political candidate, or Facebook posting has nothing to do with productive efficiency. Even worse, theorists of the firm appear not to even recognize how authoritarian firm governance is. Major theorists soft-pedal or even deny the very authority they are supposed to be trying to explain. Consider Ronald Coase, the originator of the theory of the firm. He acknowledges that firms are “islands of conscious power.”16 The employment contract is one in which the worker “agrees to obey the directions of an entrepreneur.” But, he insists, “the essence of the contract is that it should only state the limits to the powers of the entrepreneur.”17 This suggests that the limits of the employer’s powers are an object of negotiation or at least communication between the parties.

Seriously Curious: The Facts and Figures That Turn Our World Upside Down
by Tom Standage
Published 27 Nov 2018

The idea of the price mechanism is central to the study of economics. Market prices convey information about what people want to buy and what others want to sell. Adam Smith used the metaphor of the “invisible hand” to describe how the economy is governed by price signals. In 1937 a paper published by Ronald Coase, a British economist, pointed out a flaw in this view: it did not explain what goes on within firms. When employees switch from one division to another, for instance, they do not do so in response to higher wages, but because they are ordered to. The question posed by Coase was a profound, if awkward, one for economics.

Speaking Code: Coding as Aesthetic and Political Expression
by Geoff Cox and Alex McLean
Published 9 Nov 2012

Ibid., 33–34. 40. Ibid., 35. 41. GNU General Public License; available at http://www.gnu.org/copyleft/gpl.html. 42. Leach, “Modes of Creativity and the Register of Ownership,” 41. 43. Yochai Benkler, “Coase’s Penguin, or, Linux and the Nature of the Firm,” in Ghosh, Code, 169. He is referring to the economist Ronald Coase’s essay “The Nature of the Firm,” of 1937. 44. Michel Bauwens, “The Social Web and Its Social Contracts: Some Notes on Social Antagonism in Netarchical Capitalism,” Re-Public (2008; available at http://www.re-public.gr/en/?p=261). 45. Ibid. 46. Ibid. 47. Virno, A Grammar of the Multitude, 110. 48.

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World
by Ruchir Sharma
Published 5 Jun 2016

Rather than just favoring certain business allies, he also set up a competition among leading tycoons that would ultimately produce a few national industrial champions, companies like Samsung that made South Korea a leading export power. However, no new important emerging nation has achieved this kind of success—growing rapidly thanks largely to the guiding hand of an activist state—in recent decades. Of course, many will respond, what about China? As the Nobel Prize–winning economist Ronald Coase has pointed out, the conventional story about China gets the narrative wrong. China started on the road to becoming an industrial superpower only after the all-encompassing state started to interfere less in the economy. Around 1980 the Chinese government began to ease its grip, one step at a time and always in response to pressure from below.

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IMF Staff Discussion Note, 2011. 5 Bradford Johnson, “Retail: The Wal-Mart Effect; Information Technology Isn’t the Whole Story Behind Productivity,” McKinsey Quarterly (Winter 2002). 6 Robert Peston, “Inequality Is Bad for Growth, Says OECD,” BBC News, May 21, 2015. Chapter 4: Perils of the State 1 Roger Altman, “Blame Bond Markets, Not Politicians, for Austerity,” Financial Times, May 8, 2013. 2 Ahmed Feteha, “Welcome to Egypt’s Fake Weddings: Get High, Leave Lots of Cash,” Bloomberg News, June 23, 2015. 3 Ronald Coase and Ning Wang, How China Became Capitalist (London: Palgrave Macmillan, 2013). 4 Jun Ma, Audrey Shi, and Shan Lan, “Deregulation and Private Sector Growth,” Deutsche Bank Research Report, September 13, 2013. 5 Anders Aslund, “How Russia Mismanaged the Financial Crisis,” Moscow Times, February 27, 2013. 6 Amy Li, “Premier Li Keqiang Makes Case for Deeper Economic Reforms over Stimulus,” South China Morning Post, May 1, 2014. 7 Liz Matthew, “Manmohan Singh Should Have Put Foot Down, Cancelled 2G Licences,” Indian Express, November 8, 2014. 8 Yannis Palaiologos, “Syriza Must Let Markets and Meritocracy Rule,” Financial Times, May 12, 2015.

Order Without Design: How Markets Shape Cities
by Alain Bertaud
Published 9 Nov 2018

Some Russian cities have real land market; in others the system of land allocation is less clear. Under Deng Xiaoping, China chose a different path. It gradually reformed its system until it made a progressive, orderly transition from a command to a market economy. However, the shift of the system in China was not due to an ideological conversion. As Ronald Coase and Ning Wang explained in their book on China’s reform, “China became capitalist while it was trying to modernize socialism.”5 Indeed, the Chinese government allowed cities to experiment with small-scale labor and land market liberalization before expanding successful experiments to the entire country.

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Kombinats in the Soviet Union and Eastern Europe were large vertical monopolies that usually spanned one industrial sector. For instance, the kombinat in this story operated sand quarries, cement factories, concrete panel factories, and housing construction for a region. Sometimes the kombinat also extended horizontally, operating farms to provide food to its workers. 5. Ronald Coase and Ning Wang, How China Became Capitalist (London: Palgrave Macmillan, 2012), 154. 6. China Daily (Beijing), November 16, 2013, “Decisions on Major Issues Concerning Comprehensively Deepening Reforms,” adopted during the Third Plenary Session of the eighteenth meeting of the Communist Party of China Central Committee on November 12, 2013. 2 Cities as Labor Markets The Efficiency of Large Labor Markets Is the Main Cause of Ever-Growing Cities Cities Are Primarily Labor Markets Cities are primarily labor markets.

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society
by Binyamin Appelbaum
Published 4 Sep 2019

Stigler liked to argue that the work of academic economists had little impact on public policy and that Friedman was wasting his time by trying to teach economics to the general public. “Milton wants to change the world; I only want to understand it,” Stigler said.23 But those who knew Stigler marked the scope of his ambition. “He thought he was going to change the world,” said his longtime colleague Ronald Coase.24 The real difference was that Stigler focused on winning over his fellow economists. He continued to produce significant work, and to battle academic opponents with gusto, long after Friedman had turned to a life as a public intellectual. “A scholar is an evangelist seeking to convert his learned brethren to the new enlightenment he is preaching,” Stigler wrote in his memoirs.

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“Aaron Director would tell us that everything that Levi had told us the preceding four days was nonsense,” recalled one student. For some it was a religious experience. “We became Janissaries,” said Robert Bork, an early student who was one of the most influential popularizers of Director’s ideas.* Ronald Coase, a colleague who later won the Nobel Prize in economics for his work integrating economics into legal theory, also counted himself a disciple of Director, saying, “I regarded my role as that of Saint Paul to Aaron Director’s Christ. He got the doctrine going and what I had to do was bring it to the gentiles.”36 Director’s trademark was his skepticism that corporate behavior was anticompetitive.

Rentier Capitalism: Who Owns the Economy, and Who Pays for It?
by Brett Christophers
Published 17 Nov 2020

Ford and Plimmer, ‘Pioneering Britain’. 59. Ford, ‘Lax Regulation’. 60. Ibid. 61. House of Commons Culture, Media and Sport Committee, Spectrum, p. 6. 62. T. W. Hazlett, D. Porter and V. Smith, ‘Radio Spectrum and the Disruptive Clarity of Ronald Coase’, Journal of Law and Economics 54: S4 (2011), pp. S124–S165, at p. 137. 63. House of Commons Culture, Media and Sport Committee, Spectrum, p. 6. 64. T. W. Hazlett, ‘Ronald Coase and the Radio Spectrum’, Financial Times, 16 December 2009. 65. Infrastructure and Projects Authority, ‘National Infrastructure Delivery Plan 2016– 2021’, 23 March 2016, p. 20 – pdf available at assets.publishing.service.gov.uk. 66.

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return
by Mihir Desai
Published 22 May 2017

While there are innumerable variants, there are two primary interpretations of this romance that progresses from spot market transaction to long-term contractual arrangements and then all the way to merger. Each of these interpretations—the transaction cost approach and the property rights approach—is associated with a Nobel Prize (Ronald Coase in 1991 and Oliver Hart and Bengt Holmström in 2016), so, by academic standards, this is a prize fight. The considerably less romantic interpretation is that GM merged with Fisher in 1926 because the ongoing costs of contracting with each other just became too high. Yes, they could have stayed separate and just kept contracting and renegotiating contracts, but it’s so costly to write these contracts, and if they merged, they wouldn’t have to keep writing new contracts all the time.

The Ethical Algorithm: The Science of Socially Aware Algorithm Design
by Michael Kearns and Aaron Roth
Published 3 Oct 2019

After these practices were revealed, intense scrutiny of Wansink’s research led to retractions of seventeen published papers, another fifteen “corrections,” and a Cornell investigation that found scientific misconduct. He resigned from the university effective June 2019. But these cases are really just an acceleration of an old phenomenon. As Ronald Coase, a Nobel Prize‒winning British economist, put it in the 1960s, “If you torture the data for long enough, it will confess to anything.” Tending the Garden of the Forking Paths Andrew Gelman and Eric Loken, statisticians who have studied the proliferation of published but false findings in the social sciences, have a colorful name for the phenomenon of adaptivity: the “garden of the forking paths.”

Work in the Future The Automation Revolution-Palgrave MacMillan (2019)
by Robert Skidelsky Nan Craig
Published 15 Mar 2020

The challenge is to escape the curse of high employment rates, as well as the pitfalls of the working poor, entrepreneurs or self-employed. Instead of adjusting the existing tools to a rapidly shifting technological and globally competitive environment, one could design a totally new scenario. New? Maybe not that much. Remember that Ronald Coase, a very long time ago, asked why not nexuses of bilateral contract work negotiations instead of firms (Coase 1937)? What would a flexible welfare state look like? It could be based on so-­ called social drawing rights (Supiot et al. 2001). The drawing rights framework might build on various existing social rights: assistance for the unemployed in creating or taking over businesses, training leave, training vouchers, special leave, time save accounts, universal basic income, in order to extend them and, more importantly, better manage their allocation, combination and interaction.

Confessions of a Crypto Millionaire: My Unlikely Escape From Corporate America
by Dan Conway
Published 8 Sep 2019

I honestly didn’t give it too much thought other than constantly thinking, What a hassle. If I was ever going to escape, I first needed to survive and ultimately climb this ladder, no matter how badly it was shaking. Chapter Six Ethereum, a New Kind of Machine In his famous 1937 book The Modern Firm, economist Ronald Coase Noah explains why corporations have run the world economy for so long. They allow contracts to be settled, and they make it possible for people to work together to get things done. By and large, people have been working under this template for generations. The litany of complaints at your local watering hole are the bedrock of the corporation: chains of command, bureaucracy, and a culture that values polished professionals with similar temperaments and few rough edges.

The AI-First Company
by Ash Fontana
Published 4 May 2021

Otherwise, AI-First companies might aggregate government-granted advantages such as exclusive licenses to work with government data, patents on their models, or subsidies for providing predictions that allow society to plan well and function better. VERTICAL INTEGRATION The best products in the world are made by vertically integrated businesses: Apple’s hardware to software; Amazon’s warehouses to websites; and, back in the nineteenth century, industrialist Andrew Carnegie’s mines to mills. Famous economists such as Ronald Coase and entrepreneurs like Michael Dell, founder of Dell Technologies, espoused the benefits of vertical integration. Providing everything a customer needs in one package allows for quality control, deep relationships, and better pricing. There is another, major benefit for AI-First companies: capturing more data from customers using the products on site, every day.

Slouching Towards Utopia: An Economic History of the Twentieth Century
by J. Bradford Delong
Published 6 Apr 2020

Harvard economist Martin Weitzman liked to point out that there was no deep theoretical reason why providing the information that firms needed via a price target—produce if you can make it for a fully amortized unit cost of less than $X—should be more efficient than via a quantity target—produce Y units.3 But Hayek’s colleague Ronald Coase, at the University of Chicago, pointed out that one of the market economy’s great strengths was that it allowed firms to decide whether to use a bureaucratic command-and-control-style system or a system based on transaction costs (of buying and selling) to make decisions: the fact that firms could choose was key.4 Plus the fact that firms were always subject to the discipline of the marketplace, with those that lost money shrinking and vanishing in a way that state-run bureaucracies that lost money did not.5 But before Friedrich von Hayek’s word could become flesh, and dwell among us, there were three prerequisites.

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Antonio Gramsci, “Americanism and Fordism,” in Selections from the Prison Notebooks of Antonio Gramsci, London: Lawrence and Wishart, 1971 [1934], 277–320; Charles S. Maier, “Between Taylorism and Technocracy: European Ideologies and the Vision of Industrial Productivity in the 1920s,” Journal of Contemporary History 5, no. 2 (1970): 27–61. 3. Martin Weitzman, “Prices Versus Quantities,” Review of Economic Studies 41, no. 4 (October 1974): 477–491. 4. Ronald Coase, “The Nature of the Firm,” Economica 4, no. 16 (1937): 386–405. 5. Janos Kornai, The Economics of Shortage, Amsterdam: North-Holland, 1979. 6. Consider Chicago School of Economics cofounder Henry Simons, with his belief that the trust-busting Federal Trade Commission ought to be the most important and most activist arm of the government.

The Inner Lives of Markets: How People Shape Them—And They Shape Us
by Tim Sullivan
Published 6 Jun 2016

Even if it’s not specified in the contract, you can be sure it’d come up the next time the grocer and its suppliers get together to do business. 6. Jean Tirole and Jean-Charles Rochet convey this point more precisely in a 2006 article where they show that two-sided markets are only necessary when the Coase Theorem fails. This theorem, more a conjecture provided by economist Ronald Coase, essentially argues that free markets maximize efficiency in the absence of externalities or transaction costs. Andrei Hagiu and Julian Wright explore the continuum of reseller and pure marketplace in “Do You Really Want to Be an eBay?” Harvard Business Review, March 2013. 7. We thank Pierre Azoulay for this. 8.

Whiplash: How to Survive Our Faster Future
by Joi Ito and Jeff Howe
Published 6 Dec 2016

One way of thinking of these principles is that they’re observations of how two simple but profound developments initiated a powerful change in how humans interact with the world. The first, obviously, is the development of the Internet, which unlike any previous communication technology provided connections from many-to-many as well as one-to-many. The British economist Ronald Coase famously described how the firm could allocate and manage resources better than independent agents in an open market—in “Coase’s Penguin, or Linux and the Nature of the Firm,” Yochai Benkler shows that when collaboration costs are reduced, as in projects like Linux and Wikipedia, allowing people to allocate themselves to projects can create assets and organizations more effectively than top-down and structured companies.

Broken Markets: A User's Guide to the Post-Finance Economy
by Kevin Mellyn
Published 18 Jun 2012

Then, overnight, the global foreign exchange market grew by leaps and bounds as currencies were allowed to float against each other in market trading. This is where the revolution in technology comes into play. If there is a great deal of friction in making a market transaction, as Nobel Prize–winning economist Ronald Coase pointed out 80 years ago, it will tend to be replaced by bureaucratic command and control or not occur at all. This is why so much “business” takes place within huge corporations instead of free markets. Bretton Woods was very much a bureaucratic solution worked out between governments. Ending it opened up a huge scope for market transactions overnight, but the friction encountered was monumental.The key steps in a market transaction are finding a counterparty to take the other side of the trade; qualifying the counterparty as trustworthy; price discovery, which is essentially using the market to determine if the counterparty is offering or taking a fair price; executing the trade—essentially making a contract; and settling the trade (i.e., paying or getting paid).

Makers
by Chris Anderson
Published 1 Oct 2012

And like computers, they work at any scale, from the mile-long NUMMI plant to your desktop. That—not just the rise of advanced technology, but also its democratization—is the real revolution. Chapter 9 The Open Organization To make things a new way, you need to make companies a new way, too. In the mid-1930s, Ronald Coase, then a recent London School of Economics graduate, was musing over what to many people might have seemed a silly question: Why do companies exist? Why do we pledge our allegiance to an institution and gather in the same building to get things done? His eventual answer, which he published in his landmark 1937 article “The Nature of the Firm,”33 was this: companies exist to minimize “transaction costs”—time, hassle, confusion, mistakes.

The Plundered Planet: Why We Must--And How We Can--Manage Nature for Global Prosperity
by Paul Collier
Published 10 May 2010

It is that the world should adjust as efficiently as possible—which, remember, means at the least possible cost—to a low-carbon future. The issue of who compensates whom is completely independent of this problem and, as with all natural assets and liabilities, has no clear guiding principles by which ownership of carbon liabilities can be assigned. Indeed, there is a famous economic theorem by the Nobel Laureate Ronald Coase which makes precisely this point. The efficient outcome is independent of how the property rights are assigned. Because international cap-and-trade creates national property rights for emissions, it provokes an intense international struggle over how these rights should be assigned. The alternative that I have suggested is that governments should agree to a common set of taxes-cum-regulation that curb global emissions to safe levels and do not induce activities to relocate to evade facing social costs.

How Boards Work: And How They Can Work Better in a Chaotic World
by Dambisa Moyo
Published 3 May 2021

Around the world, many citizens have become skeptical of capitalism, the pursuit of economic growth, and the dominance of the private sector. This widespread mistrust of market capitalism means that conventional wisdom—such as Friedman’s opinion on the narrow responsibility of a corporation, economist Ronald Coase’s argument that the corporation is the best structure to lower costs, and general beliefs that only the corporate model can create real economic value at scale—is due for a reboot. Part of this rethinking is that corporations are now expected—by employees, investors, governments, and society at large—to become outright agents of change.

Piracy : The Intellectual Property Wars from Gutenberg to Gates
by Adrian Johns
Published 5 Jan 2010

The BBC’s first chief engineer, Peter Eckersley, championed a grand national scheme for wired broadcasting after he was forced from the corporation for being cited in a divorce – a scheme that was inspired in part by Secret Wireless’s ambitions in the twenties. But he did so in hopes of providing a media vehicle for the British fascist Sir Oswald Mosley, who was secretly his employer. At any rate, the practices of pirate listening undermined the BBC’s prized concept of “balance,” which, as the economist Ronald Coase demonstrated in his powerful midcentury critique, had always been its real raison d’être. That put in question the nature of broadcasting as a medium. In a realm of listener piracy, the messages put out might differ radically from those being received. Pirate listening threatened to create a nation of autonomous, individualized agents – modern Menocchios, as it were, ready and able to listen as unpredictably as the nowfamous Italian miller had read in the sixteenth century.

…

Probably the prime mover there of this kind of argument was Arnold Plant (1898–1978), an engineerturnedeconomist. Plant never published very much by the standards of professional economists, and most of his later career was spent as a Whitehall apparatchik. He has been far less renowned than colleagues of the time like Friedrich von Hayek and his own onetime assistant Ronald Coase. But he was extremely influential behind the scenes, not least by virtue of being personally associated with many of the economists who chafed at Keynesian orthodoxy after the war. In papers that he did publish on copyright and patents in the 1930s, and in later ones addressing public broadcasting, Plant laid out a template for their attack.

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live
by Rachel Botsman and Roo Rogers
Published 2 Jan 2010

These are the items that would have been a pain to lug to the dump (and sometimes you would even have to pay to dispose of them) or tricky to unload on a neighbor. The transaction costs to ensure they were kept in use, not in landfill, would have been high. In his paper “The Nature of the Firm,” economist and Nobel laureate Ronald Coase coined the term “transaction costs” to refer to the cost of making any form of exchange or participating in a market.3 If you go to the supermarket, for example, and buy some groceries, your costs are not just the price of the groceries but the energy, time, and effort required to write your list, travel to and from the store, wheel around your cart and choose your products, wait in the checkout line, and unpack and put away the groceries when you get back home.

The Happiness Industry: How the Government and Big Business Sold Us Well-Being
by William Davies
Published 11 May 2015

Stigler would never forget that evening and later cursed Director for not having tape-recorded it.13 It became a turning point for his career and for the Chicago School more generally. Arguably, it was a turning point for the project of neoliberalism. The paper that was discussed that evening was the work of the British economist Ronald Coase, then of the University of Virginia. Coase always resisted the iconic status that Stigler and others were keen to bestow upon him. His career had progressed quietly and methodically, through asking simple scientific questions about why economic institutions are structured as they are. He claimed never to understand the excitement that his work had engendered.

Social Life of Information
by John Seely Brown and Paul Duguid
Published 2 Feb 2000

Not, though, stark enough to step from here to what the business writers Larry Downes and Chunka Mui call the "Law of Diminishing Firms." After all, it's GM that's shrinking. Microsoft continues to grow while other high-tech start-ups compete for the title of "fastest growing ever." 22 Downes and Mui draw on the theory of the firm proposed by the Nobel Prize-winning economist Ronald Coase. Coase developed the notion of transaction costs. These are the costs of using the marketplace, of searching, evaluating, contracting, and enforcing. When it is cheaper to do these as an organization than as an individual, organizations will form. Conversely, as transaction costs fall, this glue dissolves and firms and organizations break apart.

Skin in the Game: Hidden Asymmetries in Daily Life
by Nassim Nicholas Taleb
Published 20 Feb 2018

The employable person is embedded in an industry, with fear of upsetting not just their employer, but other potential employers.fn2 COASE’S THEORY OF THE FIRM Perhaps, by definition, an employable person is the one you will never find in a history book, because these people are designed to never leave their mark on the course of events. They are, by design, uninteresting to historians. But let us now see how fits the theory of the firm and the ideas of Ronald Coase. An employee is—by design—more valuable inside a firm than outside of it; that is, more valuable to the employer than the marketplace. Coase was a remarkable modern economist in that he was independent thinking, rigorous, and creative, with ideas that are applicable and explain the world around us—in other words, the real thing.

Restarting the Future: How to Fix the Intangible Economy
by Jonathan Haskel and Stian Westlake
Published 4 Apr 2022

Modern-day lighthouses provide such a service, but radio transmission has mostly superseded light as a navigation aid. 26. For those who studied economics, you will have encountered the lighthouse example in almost any textbook. It was first used in Samuelson’s famous economic textbook in 1948. The economist Ronald Coase pointed out the fact that lighthouses were privately provided; nonetheless, the lighthouse, as an example of a public good, seems to have remained in many textbooks. 27. Levitt 2020. 28. Van Zandt 1993. The economist Kenneth Arrow (1962) argued that there is a second economic difficulty: unless the lighthouse owner could commit to an acceptable price in advance (for example, by publishing a price schedule), the ship owner might worry about being charged a high price and so not use the lighthouse at all. 29.

A Beautiful Mind
by Sylvia Nasar
Published 11 Jun 1998

From the start, he was highly skeptical of game theory — as indeed he is of all pure theory. He is an institutionalist, likes intuitive rather than formal reasoning, and is leery of mathematics and “technicians.” He was, for example, a main mover behind the prizes for James Buchanan in 1986 and Ronald Coase in 1991 — economists whose theories focus on the way governments and legal structures affect the workings of markets. He also prides himself on grasping Nobel politics. The more he learned about Nash, the less he liked the idea of giving Nash a prize. In particular, he considered giving the prize to Nash the kind of ill-considered gesture that was likely to result in embarrassment and, more important, make the committee look bad.

…

The most dramatic use of game theory is by governments from Australia to Mexico to sell scarce public resources to buyers best able to develop them. The radio spectrum, T-bills, oil leases, timber, and pollution rights are now sold in auctions designed by game theorists — with far greater success than that of earlier policies.13’ Economists like Nobel Laureate Ronald Coase have advocated the use of auctions by government since the 1950s.14 Auctions have long been used in markets where sellers of unusual items — from vintage wines to movie rights — have no idea what bidders are willing to pay. Their basic purpose is to make bidders reveal how much they value the item.

What Would Google Do?
by Jeff Jarvis
Published 15 Feb 2009

Agencies may help solve problems—teaching companies how to build networks with customers, assisting them with product launches—but once the consultation is done, the good consultant leaves town. Tobaccowala suggested agencies remake themselves as networks. He quoted University of Chicago economist Ronald Coase in his seminal 1937 essay, “The Nature of the Firm”—which is also quoted in Wikinomics, Here Comes Everybody, and, it would seem, half the business books published lately. Coase reasoned that firms exist and grow when internal friction is less than external friction, when it is easier and cheaper to deal with insiders than with outsiders.

The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism
by Arun Sundararajan
Published 12 May 2016

Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA: Harvard University Press, 1993; original published 1977). 6. I realize that a lot of Malone, Yates, and Benjamin’s work, and Vijay Gurbaxani and Seungjin Whang’s work, draws from seminal earlier work by Friedrich Hayek (1937), Ronald Coase (1945), and Oliver E. Williamson’s work, perhaps even later work by Sanford Grossman, Oliver Hart, and John Moore, and a host of other excellent economists and social scientists. I am not attempting a systematic analysis of the literature here, but a brief discussion of some intellectual foundations. 7.

Capitalism Without Capital: The Rise of the Intangible Economy
by Jonathan Haskel and Stian Westlake
Published 7 Nov 2017

Those engaged in its production, the miners, the tree-fellers, and the truckers, take instructions not from the individual pencil buyers but via the price system. If pencil prices rise, more graphite is mined, more trees are felled, and more wood is transported. No personal authority is required, since the price system issues the instructions. In light of this, in 1937 Ronald Coase (another Nobel laureate) asked a deceptively simple, but very profound, question: Why then do firms exist? If markets do a pretty good job coordinating the economy, what’s the need for firms? Coase’s answer was that firms did a cheaper job of coordination than markets. Inside a firm, Coase said, coordination by internal markets would be very costly since you would have to (a) discover what the market prices are and (b) negotiate a contract for each and every transaction.

Machinery of Freedom: A Guide to Radical Capitalism
by David Friedman
Published 2 Jan 1978

If you have the right to order me to shut down my candy factory, I can offer instead to pay the cost of tearing down your consulting room and rebuilding it on the other side of the lot. If the right is more valuable to me than to you, I should be able to make some offer that you will accept. This insight leads us to the Coase Theorem, named after Ronald Coase, the economist whose ideas are largely responsible for this part of the chapter. The Coase Theorem states that any initial definition of property rights will lead to an efficient outcome, provided that transaction costs are zero. The condition — zero transaction costs — is as important as the theorem.

The Precariat: The New Dangerous Class
by Guy Standing
Published 27 Feb 2011

The commodification of companies means that commitments made by today’s owners are not worth as much as they used to be. The owners could be out tomorrow, along with their management teams and the nods-andhandshakes that make up informal bargains about how labour is done, how payments should be honoured and how people are treated in moments of need. In 1937, Ronald Coase set out a theory that was to earn him a Nobel Prize in Economics. He argued that firms, with their hierarchies, were superior to atomised markets made up solely of individuals; they reduced the transaction costs of doing business, one reason being that they fostered long-term relationships based on trust.

Here Comes Everybody: The Power of Organizing Without Organizations
by Clay Shirky
Published 28 Feb 2008

This ability of the traditional management structure to simplify coordination helps answer one of the most famous questions in all of economics: If markets are such a good idea, why do we have organizations at all? Why can’t all exchanges of value happen in the market? This question originally was posed by Ronald Coase in 1937 in his famous paper “The Nature of the Firm,” wherein he also offered the first coherent explanation of the value of hierarchical organization. Coase realized that workers could simply contract with one another, selling their labor, and buying the labor of others in turn, in a market, without needing any managerial oversight.

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century
by Ryan Avent
Published 20 Sep 2016

And the concentration of the most valuable bits of the production chain into smaller, highly profitable firms means that workers across the rest of the economy struggle to share in the gains from growth. Small, brainy companies are responsible for producing enormous economic value in the digital era. The result is a big distributional mess. THE NATURE OF THE COMPANY ‘Why do firms exist?’ seems like the sort of question economists should have no trouble answering. Yet when Ronald Coase began probing at the idea in a 1937 academic paper, it quickly became clear that the question was a surprisingly tricky one.2 Coase was a British economist who lived an extraordinarily long and productive life. He lived to be 102, and still kept busy writing at 100, though his work in the 1930s, when he was in his twenties, was among his most important.

Frugal Innovation: How to Do Better With Less
by Jaideep Prabhu Navi Radjou
Published 15 Feb 2015

The rise of the horizontal economy Vertically integrated value chains, controlled by companies that exclude customers, are being challenged by new value ecosystems orchestrated by customers themselves. The new ecosystems allow consumers to design, build, market, distribute and trade goods and services by and among themselves, without the need for intermediaries. This bottom-up approach is creating the horizontal economy. In a 1937 essay, Ronald Coase, a Nobel Prize-winning economist, argued that the reason Western economies are organised vertically – like a pyramid with a few large producers at the top and millions of passive consumers at the bottom – is because of transaction costs (the intangible costs associated with search, bargaining, decision-making and enforcement).5 But with the explosion of the internet, mobile technologies and social media – think of the 1.3 billion interconnected Facebook users – these transaction costs have all but disappeared in many sectors.

Lying for Money: How Fraud Makes the World Go Round
by Daniel Davies
Published 14 Jul 2018

For projects which need to make long-term plans and output decisions over time, it is more efficient to draw together resources on the basis of long-term contracts rather than to keep bidding for them in a brand-new market every day. A large cluster of these long-term contracts is what we call a firm, and Ronald Coase’s contribution to this strand of intellectual history was to set out the circumstances under which firms would form, and how the economy would tend not to the frictionless ideal, but to be made up of islands of central planning* linked by bridges of price signals. Of course, bringing the theory of the firm back into the model brings back a lot of the information problems associated with the socialist planning debate.

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next
by Andrew McAfee
Published 30 Sep 2019

If pollution is costly instead of free, companies will work hard to “de-pollute,” just as they work hard to dematerialize. Markets for Pollution!?!? If companies can buy and sell the right to pollute, things will get even better. This is the conclusion of a line of thinking kicked off by the legendary and Nobel Prize–winning economist Ronald Coase in his 1960 paper “The Problem of Social Cost.” Coase argued that since markets work so well, the smart thing to do with externalities such as pollution is to make them tradable in a market. “Let’s allow companies to buy and sell pollution” struck many at the time as even more strange and distasteful than “let’s allow companies to pollute for a fee.”

The Classical School
by Callum Williams
Published 19 May 2020

He also favoured government regulations in the Mint, the Post Office, and hallmarks for gold and silver.7 In a word, he was a long way from a laissez-faire zealot.8 Discoveries of Smith, discoveries by him Smith also contributed to the theories and practices underlying economic analysis. And it is for these contributions that he is most famous. In the 1850s Henry Thomas Buckle, an English historian, said that “innumerable absurdities, which had been accumulating for ages, were suddenly swept away” by the Wealth of Nations. Ronald Coase, a Nobel-prizewinning economist, called Smith “perhaps the greatest economist who has ever been”. A recent book by the economist Mark Skousen, The Big Three in Economics, says that “the story of modern economics begins in 1776”, the year of the publication of the Wealth of Nations. Some historians even link the beginning of the industrial revolution in the late 18th century to the publication of Smith’s most famous work.

Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy
by George Gilder
Published 16 Jul 2018

At Apple, Steve Jobs originally attempted to accomplish such a separation by barring third-party software applications (or “apps”). Amazon has largely succeeded in isolating its own domains and linking to outside third parties such as credit card companies. But these centralized fortresses violated the Coase Theorem of corporate reach. In a famous paper, the Nobel-laureate economist Ronald Coase calculated that a business should internalize transactions only to the point that the costs of finding and contracting with outside parties exceed the inefficiencies incurred by the absence of real prices, internal markets, and economies of scale.6 The concentration of data in walled gardens increases the cost of security.

Free culture: how big media uses technology and the law to lock down culture and control creativity
by Lawrence Lessig
Published 15 Nov 2004

One made the argument I've already described: A brief by Hal Roach Studios argued that unless the law was struck, a whole generation of American film would disappear. The other made the economic argument absolutely clear. This economists' brief was signed by seventeen economists, including five Nobel Prize winners, including Ronald Coase, James Buchanan, Milton Friedman, Kenneth Arrow, and George Akerlof. The economists, as the list of Nobel winners demonstrates, spanned the political spectrum. Their conclusions were powerful: There was no plausible claim that extending the terms of existing copyrights would do anything to increase incentives to create.

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay
by Guy Standing
Published 13 Jul 2016

The second highly influential MPS member, possibly even more so than Hayek, was Milton Friedman, who had been the youngest inaugural member of the society in 1947. Associated with monetarism – and with supporting Pinochet, Thatcher and Reagan – in 1976 he too went on to receive a Nobel Prize for Economics. He and Hayek were two of the eight original members who received the prize, the others being George Stigler, James Buchanan, Maurice Allais, Ronald Coase, Gary Becker and Vernon Smith. The third influential economist was Ludwig von Mises, proponent of the nineteenth-century Austrian school of economics, which shaped neo-liberalism. One of its tenets was that value could be measured only by the market. So something without ‘exchange value’ had no value at all.

Lectures on Urban Economics
by Jan K. Brueckner
Published 14 May 2011

In actuality, many polluters (not just a single factory) typically contribute to the pollution that affects consumers in a given neighborhood. In addition, real-world measurement of the MD and MB curves is fraught with difficulty. Section 9.4 discusses pollution policies in a more realistic setting. 9.3 Bargaining as a Path to the Social Optimum: The Coase Theorem In a famous and influential article published in 1960, Ronald Coase argued that bargaining between the party generating an externality and those affected by it could, under some circumstances, lead to the social optimum. As a result of bargaining, the externality-generating activity would be set at the socially optimal level. Coase argued that two conditions must be satisfied for this outcome to occur.

Radical Markets: Uprooting Capitalism and Democracy for a Just Society
by Eric Posner and E. Weyl
Published 14 May 2018

If they tried to expand their factories, a landowner would hold out. If they tried to build a railroad, thousands of local politicians tried to extract a pound of flesh. Every small supplier of oil, coal, or parts would waste endless hours bargaining with them or trying to take advantage of them. Nobel Laureate Ronald Coase called these frustrations the “transaction costs of the market.”10 He explained that to avoid this chaos, business people formed large corporations that would own many assets, such as factories and parcels of land, and employed many workers whom the head of the corporation could centrally direct to accomplish its goals without constant negotiation.

Rebooting India: Realizing a Billion Aspirations
by Nandan Nilekani
Published 4 Feb 2016

By pooling the homes and spare bedrooms of thousands of people, Airbnb now has more rooms than the biggest hotel chains. In India, Oyo Rooms has achieved much the same with budget hotels. Flipkart and Amazon provide marketplaces where merchants sell just about anything to hundreds of millions of customers. In his pioneering article, ‘The Nature of the Firm’, written in 1937, the economist Ronald Coase argued that the costs of carrying out transactions—the costs of search and information, coordination and contracting—meant that it made better financial sense for people to organize themselves into firms. As the friction around these costs grew, firms themselves would keep expanding. While this was an accurate worldview in 1937, today technology has upended Coase’s law.

Living in a Material World: The Commodity Connection
by Kevin Morrison
Published 15 Jul 2008

In the Markets for Clean Air The philosophy of cap-and-trade systems for dealing with environmental issues is not a result of unrestrained market capitalism, but rather the refinement of an academic debate which has lasted almost 50 years. It can be traced back to an article in 1960, ‘The Problem of Social Cost’ by Ronald Coase. The British-born economist (and Nobel Prize winner for economics in 1991), suggests that well-defined property rights could control ‘externalities.’18 (Latterly this has been taken to mean the effects of economic activity on the environment.) Coase refutes the work of Arthur Cecil Pigou, who, in 1920, recommended corrective taxes to discourage activities that generate ‘externalities’ (Hahn and Stavins, 1992) Coase’s work was followed by more research when Thomas Crocker in 1966 and John Dales in 1968 each wrote papers about the prospect of using transferable permits to allocate the pollution-control burden between emitters.

Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die
by Eric Siegel
Published 19 Feb 2013

The trees we’ve seen achieve various lifts at the 20 percent mark: Decision Tree Lift at 20 Percent 4 segments 2.5 10 segments 2.8 39 segments 3.0 As the tree gets bigger, it keeps getting better, so why stop there? Shall we keep going? Slow down, Icarus! I’ve got a bad feeling about this. Overlearning: Assuming Too Much If you torture the data long enough, it will confess. —Ronald Coase, Professor of Economics, University of Chicago There are three kinds of lies: lies, damned lies, and statistics. —British Prime Minister Benjamin Disraeli (quote popularized by Mark Twain) An unlimited amount of computational resources is like dynamite: If used properly, it can move mountains.

The Physics of Wall Street: A Brief History of Predicting the Unpredictable
by James Owen Weatherall
Published 2 Jan 2013

The mathematics, he was convinced, was too simple; the subject matter, too complex. Economics was a worthless pursuit, a pseudoscience. Finally, on the verge of giving up, Malaney tried one last tack. She gave Weinstein a challenge, a problem whose solution was equivalent to a classic result in economics known as Coase’s theorem. Ronald Coase was a British economist who spent most of his career in the United States, at the University of Chicago. He was interested in something he called “social cost.” Imagine you are the local sheriff in an agricultural community. Two of your constituents come to you, asking you to help them settle an ongoing dispute.

Remix: Making Art and Commerce Thrive in the Hybrid Economy
by Lawrence Lessig
Published 2 Jan 2009

LEGO-ized innovation is just one component of what Tim O’Reilly first tagged “Web 2.0.”29 It may ultimately be the most important. For it demonstrates both how the Internet is uniquely poised to exploit a general tenet of economics and how the Internet takes advantage of the principle of democratization that is its hallmark. Consider these two in turn. Economics In 1937 Nobel laureate Ronald Coase was wondering why there were firms in a free market.30 If the core of a market was that resources should be allocated by price, why within a firm wasn’t it price that determined who got what? Within a firm it was the command of a “boss.” Life inside the firm thus looked more like the “economic planning” of communism than the competition of a marketplace.

How Not to Network a Nation: The Uneasy History of the Soviet Internet (Information Policy)
by Benjamin Peters
Published 2 Jun 2016

A few standard references in the literature include Thorsten Veblen’s heterodox position in “Why Is Economics Not an Evolutionary Science?,” Quarterly Journal of Economics 12 (1898): 373–393; Thomas C. Schelling, Micromotives and Macrobehavior (New York: Norton, 1978); Douglass C. North, Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, 1998); Ronald Coase, “The New Institutional Economics,” American Economic Review 88 (2) (1998): 72–74; and William Kapp, The Foundations of Institutional Economics (New York: Routledge, 2011). For comparison to the quirkiness of individual decisions, see popular introductions to cognitive psychology and behavioral psychology and economics, such as Daniel Kahnemann, Thinking Fast and Slow (New York: Farrar, Straus, and Giroux, 2011), and Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions (New York: HarperCollins, 2008).

Smart Mobs: The Next Social Revolution
by Howard Rheingold
Published 24 Dec 2011

The Communications Act of 1934 added authority over telephone and telegraph communications and created the Federal Communications Commission.8 The 1927 and 1934 laws established that airways are public property, that commercial broadcasters must be licensed to use the airways, and that the main condition for use is whether the broadcaster serves “the public interest, convenience, and necessity.”9 Since only specialists understand (or even hear about) the fine points of wireless technologies and their regulatory implications, the big-boys-only business of selling the spectrum has largely been ignored by the citizens on whose behalf the transactions were executed.10 Economist Ronald Coase, who later won a Nobel Prize, convinced the FCC that auctioning spectrum was more efficient and inherently more fair than the original license-granting procedure because it eliminated outright granting of licenses as political favors and insured that the owner of a spectrum license, having paid top dollar for it, would be motivated to develop the use of that spectrum allocation.11 Top dollar in a public auction is indeed more open than political deal making.

Superminds: The Surprising Power of People and Computers Thinking Together
by Thomas W. Malone
Published 14 May 2018

Even though markets are often cheaper to operate than hierarchies when many people and decisions are involved, they can be more expensive, too, especially in ever-changing situations that involve only a small number of potential trading partners. A number of Nobel Prize–winning economists, including Ronald Coase, Oliver Williamson, Oliver Hart, and Bengt Holmström, have analyzed the situations in which this is true.8 A key issue is that the transaction costs of making decisions in markets can sometimes be greater than those of hierarchies. For instance, say Ron promises to give Elizabeth a slice of deer meat in exchange for a bunch of grapes, but then he takes the grapes and never gives her the meat.

Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You
by Sangeet Paul Choudary , Marshall W. van Alstyne and Geoffrey G. Parker
Published 27 Mar 2016

Platform businesses are here to stay, and they are bringing undoubted benefits to millions of people. Why run the risk of discouraging innovation through the heavy hand of regulation? Opponents of regulation are quick to point out the many cases in which it fails or backfires. Nobel Prize-winners Ronald Coase and George Stigler, members of the famous laissez-faire-oriented Chicago School of economics, argue that the vast majority of market failures are best addressed by market mechanisms themselves—for example, by encouraging the free growth of competitors who provide goods and services that produce greater social benefits than their rivals.

Nomad Citizenship: Free-Market Communism and the Slow-Motion General Strike
by Eugene W. Holland
Published 1 Jan 2009

This Internet-mediated intellectual commons is a key feature of the peer-production system, and we will return to it later. The final Im portant feature of the new system is that peer produc­ tion is based neither on incentives coming from the market nor on or­ ders coming from a boss or managing supervisor. A now-classic analysis of capitalist production spearheaded by Ronald Coase in the 1930s and developed subsequently by Oliver Williamson and others examined the relative transaction costs to a business firm of buying goods and services on the open market compared to hiring people to produce those same goods and services within the firm.95 Where transaction costs of buying on the open market are high, production is integrated into the firm and triggered by managerial command; where they are low, production is out­ sourced and triggered by market pricing mechanisms.

The Evolution of Everything: How New Ideas Emerge
by Matt Ridley

In effect, the cattlemen of the nineteenth century rediscovered what medieval merchants had found – that customs and laws would emerge where they were not imposed. It was very far from anarchic. Robert Ellickson of Yale documented a good example of this more recently in Shasta County, California, an area of farms and ranches. Taking his cue from a famous example given by the economist Ronald Coase (who argued that in the absence of transaction costs, wrongs between cattle ranchers and wheat farmers would be righted by private negotiation rather than state punishment), Ellickson looked to see how individuals actually dealt with trespassing cattle. He found that the law was largely irrelevant.

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy
by Marc Levinson
Published 31 Jul 2016

Congress had briefly considered rolling back some of the regulations governing trains and trucks in 1957, and in 1968 the Federal Communications Commission had allowed customers to connect some of their own equipment to the telephone network, a tiny step toward deregulation of the telecommunications sector. More consequentially, economists such as George Stigler and Ronald Coase, both of the University of Chicago, had been laying the intellectual framework for deregulation since the 1950s by arguing that the economy would be better off if prices for particular goods and services were determined by competition rather than the dictates of government agencies. The Ford Foundation had jumped into the fray in 1967, granting the Brookings Institution, a Washington think tank, $1.8 million for a program of studies that resulted in 125 books, journal articles, and dissertations on regulation or deregulation by 1975.

Exponential: How Accelerating Technology Is Leaving Us Behind and What to Do About It
by Azeem Azhar
Published 6 Sep 2021

The flows of information between bosses, managers and employees might get entangled. Headquarters might lose track of what the front line worker was doing. If you have ever worked at a very large company, you’ll be familiar with how bureaucracy creeps in and slows everything down. The economist Ronald Coase described this predicament well: in his rendering, organisational costs grow as firms get bigger and come to act as a force of gravity, slowing a company’s expansion and eating away at the advantages of scale.1 As companies expanded and became more complex, managing them became like sorting through a mess of tangled wires – with too many contradictions resulting in slower and slower decision-making.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

Although we do observe some convergence among leading industrial nations that trade with each other, an overwhelming feature of the last ten millennia is that we have evolved into radically different religious, ethnic, cultural, political, and economic societies, and the gap between rich and poor nations, between developed and undeveloped nations, is as wide today as it ever was and perhaps a great deal wider than ever before.3 It seems hardly radical, but North took economics out of its comfort zone, which consisted of examining more easily measured inputs like labour and capital and instead brought in politics, sociology and history in order to understand why some countries succeed and others fail. North won the Nobel Prize in economics in 1993. Along with his fellow laureates Ronald Coase (who won in 1991) and Oliver Williamson (who won more than a decade later in 2009), North founded the field of New Institutional Economics. This work was later expanded upon by MIT economist Daron Acemoglu and University of Chicago political scientist James Robinson, notably in their book Why Nations Fail: The Origins of Power, Prosperity, and Poverty, and by many others who have built on North’s work on the role of institutions in economic development.

Philanthrocapitalism
by Matthew Bishop , Michael Green and Bill Clinton
Published 29 Sep 2008

The right-wing political philanthropists “have not been attacked the way I have been attacked,” says Soros, which he thinks “reflects that they already have more influence.” One of the achievements of the right-wing foundations that Soros cites is the creation of the discipline of “law and economics,” which grew out of the University of Chicago in the 1970s. This movement, whose ranks include two winners of the Nobel Prize in Economics, Ronald Coase and Gary Becker, uses considerations of economic efficiency to help solve legal questions. As well as having a perceived free-market bias, law and economics is opposed by those, usually on the left, who believe that law should focus on absolutes of what is right, not engage in utilitarian calculations of economic benefits.

Super Thinking: The Big Book of Mental Models
by Gabriel Weinberg and Lauren McCann
Published 17 Jun 2019

Smoking externalities are internalized via cigarette taxes and higher health insurance premiums for smokers. Traffic congestion externalities are internalized through tolls. On a personal level, your neighbor might file a noise complaint against you if you consistently play music too loud. Another way to internalize externalities is through a marketplace. Ronald Coase won the Nobel Prize in economics in 1991 in part for what has become known as the Coase theorem, essentially a description of how a natural marketplace can internalize a negative externality. Coase showed that an externality can be internalized efficiently without further need for intervention (that is, without a government or other authority regulating the externality) if the following conditions are met: Well-defined property rights Rational actors Low transaction costs When these conditions are met, entities surrounding the externality will transact among themselves until the extra costs are internalized.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

Although we do observe some convergence among leading industrial nations that trade with each other, an overwhelming feature of the last ten millennia is that we have evolved into radically different religious, ethnic, cultural, political, and economic societies, and the gap between rich and poor nations, between developed and undeveloped nations, is as wide today as it ever was and perhaps a great deal wider than ever before.3 It seems hardly radical, but North took economics out of its comfort zone, which consisted of examining more easily measured inputs like labour and capital and instead brought in politics, sociology and history in order to understand why some countries succeed and others fail. North won the Nobel Prize in economics in 1993. Along with his fellow laureates Ronald Coase (who won in 1991) and Oliver Williamson (who won more than a decade later in 2009), North founded the field of New Institutional Economics. This work was later expanded upon by MIT economist Daron Acemoglu and University of Chicago political scientist James Robinson, notably in their book Why Nations Fail: The Origins of Power, Prosperity, and Poverty, and by many others who have built on North’s work on the role of institutions in economic development.

The Equality Machine: Harnessing Digital Technology for a Brighter, More Inclusive Future
by Orly Lobel
Published 17 Oct 2022

When studies use military databases, they are studying gender-imbalanced data. Neglecting to count and study women’s health has resulted in alarming medical risks. In just one telling example, prescription drugs taken off the market by the Food and Drug Administration (FDA) disproportionately relate to health risks for women.5 Economist Ronald Coase said that if you torture the data long enough, it will confess to anything. Data has to be mined with caution, because too often it can be tainted or skewed. Remember, we don’t know what we don’t count. Missing data sets are our collective blind spots, blank spaces within a world overflowing with information.

Machine, Platform, Crowd: Harnessing Our Digital Future
by Andrew McAfee and Erik Brynjolfsson
Published 26 Jun 2017

So the technology seems to support decentralizing all the things. What about the economics? What does economic theory and evidence have to say about how tech progress changes companies and other ways we organize to get work done? Quite a lot, actually. . . . Meet the Economics of the Firm In November 1937, when he was just twenty-six, the economist Ronald Coase published his landmark paper “The Nature of the Firm.” In it, he posed a very basic question: If markets are so great, why does so much happen inside companies? Why, in other words, do we choose to conduct so much economic activity within these stable, hierarchical, often large and bureaucratic structures called companies, rather than just all working as independent freelancers, coming together as needed and for only as long as necessary to complete a particular project, then going our own way afterward?

The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention
by William Rosen
Published 31 May 2010

In a slightly perverse reminder that lawyers have clients, not opinions, Edward Coke, as the Attorney General of England, represented Darcy, whose hostility to monopolies was already well known, though less as a matter of principle and more as a matter of economics: Coke was convinced that monopolies were costly6 to Britain’s artisans. In 1961, the British economist Ronald Coase published an article entitled “The Problem of Social Cost” that jump-started one of the most influential ideas in modern legal theory: the school familiarly known as Law and Economics, which proposes that legal decisions ought to account for economic efficiency as well as more traditional measures such as legislative history or case precedent.

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated)
by Charles Wheelan
Published 18 Apr 2010

Markets alone fail to make us better off when there is a large gap between the private cost of some activity and the social cost. Reasonable people can and should debate what the appropriate remedy might be. Often it will involve government. Of course, sometimes it may not. The parties involved in an externality have an incentive to come to a private agreement on their own. This was the insight of Ronald Coase, a University of Chicago economist who won the Nobel Prize in 1991. If the circumstances are right, one party to an externality can pay the other party to change their behavior. When my neighbor Stuart started playing his bongos, I could have paid him to stop, or to take up a less annoying instrument.

Giving the Devil His Due: Reflections of a Scientific Humanist
by Michael Shermer
Published 8 Apr 2020

Money that should be spent on, say, food, clothes, health care, future college tuition, or mortgage payments, is being wasted on frivolous ceremonial one-upmanship. The Hidden Costs of Market Failures and Moral Hazards Moving from examples to analysis, Frank employs a technical model developed by the economist Ronald Coase that shows precisely how economists can take into account such transaction costs in order to better understand macroeconomic phenomena and correct for market failures. Here Frank claims that the transaction costs of keeping up with the Joneses are not presently included in the price of homes, suits, shoes, and parties in terms of the real benefit to the owners, so this is an example of a market failure (and, he opines, a moral hazard) that he suggests can be remedied through a progressive consumption tax wherein these newfound liabilities would not only adjust the transaction costs to account for the hedonic treadmill while simultaneously curtailing needless consumptive behavior, it would also generate additional tax revenues from the rich that could be used to shore up our crumbling Social Security and Medicare accounts.

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

He was an early patron of Friedrich Hayek and was instrumental in having Hayek’s Road to Serfdom published in the U.S. 14.The Chicago School of economics at the University of Chicago has championed a neoclassical school of economic thought, which, during the Keynesian hegemony, countered the new orthodoxy with traditional market-based arguments. School members included Gary Becker, Ronald Coase, Eugene Fama, Robert Fogel, Milton Friedman, Lars Peter Hansen, Friedrich Hayek, Frank Knight, Robert E. Lucas, Richard Posner, Theodore Schultz, D. Gale Johnson, and George Stigler. 15.Frank Hyneman Knight (November 7, 1885–April 15, 1972), one of the founders of the Chicago School of economics, who taught Nobel economics laureates Friedman, George Stigler, and James M.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor
by John Kay
Published 24 May 2004

John Nash was author of the principal solution concept in game theory-the Nash equilibrium-but his productive career was ended by schizophrenia. His health partially restored, he was awarded the Nobel Prize in 1994. 21 Nash was played by Russell Crowe in an Oscar-winning film of his life, A Beautiful Mind. Institutional (or transactions cost) economics regards as its founder Ronald Coase,n a British economist who spent most of his career at the University of Chicago. His claim to fame rests mainly on two articles, published almost twenty-five years apart. The first was concerned with the theory of the firm. In the perfectly competitive world of Part III, firms played little or no role.

Open Standards and the Digital Age: History, Ideology, and Networks (Cambridge Studies in the Emergence of Global Enterprise)
by Andrew L. Russell
Published 27 Apr 2014

Boundary activities, as we have seen, are crucial sites where managers and engineers decide through managerial hierarchies what they can make or decide inside their firm, and what they need to do with respect to markets and organizations that exist outside the firm. In some cases, these decisions can be understood in terms of economic efficiency, using the economist Ronald Coase’s concept of transaction costs.7 The problem with the concept is that it tends to reduce – or ignore altogether – strategic, political, and cultural factors that are in many cases decisive. We deceive ourselves if we pretend that decisions to build from within or purchase from without are made solely on the grounds of economic efficiency.

Misbehaving: The Making of Behavioral Economics
by Richard H. Thaler
Published 10 May 2015

I had resolved to remain calm so I just smiled at this outburst, said, “Okay then,” and moved on. There was much more contentious material still to come, and I was determined not to get into a shouting contest, especially with a federal judge! The biggest fight was about something called the Coase theorem. The Coase theorem is named for its inventor, Ronald Coase, who had been a faculty member at University of Chicago Law School for many years. The theorem can be easily stated: in the absence of transaction costs, meaning that people can easily trade with one another, resources will flow to their highest-valued use.‡ The logic is easy to explain. I will follow Coase’s lead and explain it with a simple numerical example.

How Asia Works
by Joe Studwell
Published 1 Jul 2013

Governments manipulated economies which thereby forged ahead and created wealth that paid for people – who cannot be neatly transformed by government policy – to catch up. Neo-classical economists do not like political intervention in markets. They claim that markets are inherently efficient. But history shows that markets – with the primordial exception of what the institutional economist Ronald Coase dismissed as ‘individuals exchanging nuts for berries on the edge of the forest’ – are created.1 Which is to say that in a functioning society markets are shaped and re-shaped by political power. Without the dispossession of landlords in Japan, Korea, Taiwan and China there would have been no increased agricultural surplus to prime industrialisation.

Data Science for Business: What You Need to Know About Data Mining and Data-Analytic Thinking
by Foster Provost and Tom Fawcett
Published 30 Jun 2013

The example from the previous section was contrived; the data mining built a model using pure memorization, the most extreme overfitting procedure possible. However, all data mining procedures have the tendency to overfit to some extent—some more than others. The idea is that if we look hard enough we will find patterns in a dataset. As the Nobel Laureate Ronald Coase said, “If you torture the data long enough, it will confess.” Unfortunately, the problem is insidious. The answer is not to use a data mining procedure that doesn’t overfit because all of them do. Nor is the answer to simply use models that produce less overfitting, because there is a fundamental trade-off between model complexity and the possibility of overfitting.

The Fissured Workplace
by David Weil
Published 17 Feb 2014

Growth in its market gave it greater clout to negotiate lower prices with food suppliers, further expanding its cost advantages, allowing A&P to grow and capture substantial market share across the country.5 In so doing, A&P changed the nature of the food retailing industry and the way companies needed to organize themselves to compete. As a result, the boundary of firms in the industry came to incorporate many of the functions that, before A&P’s ascendency, would have been undertaken through market transactions. Defining Enterprise Boundaries Ronald Coase argued in “The Nature of the Firm” (one of the most famous essays in the history of economics) that the boundaries of a business enterprise could not be understood without thinking about the decision of when work should be done inside versus outside of the organization. Many of the activities of corporations involve the allocation of resources across different activities.

Connectography: Mapping the Future of Global Civilization
by Parag Khanna
Published 18 Apr 2016

While Silicon Valley technology companies employ fewer workers than their industrial-age counterparts such as General Motors, their global services platforms facilitate portable and digital work for the connected masses whether posting advertisements, verifying addresses, photographing for registries, comparing prices for companies, or performing other basic tasks. A digital middle class is emerging whose prerequisite is not a broad consumer base or even a market economy but online connectivity. Economists such as Ronald Coase sought to determine the optimal size of firms to reduce transaction costs in carrying out certain functions efficiently. Today’s network structures that leverage growing frictionless connectivity shatter previous assumptions by expanding in scale without commensurate growth in size. Even as traditional productivity metrics still fail to capture all the benefits created by such connectivity, innovation itself very much depends on it.

More: The 10,000-Year Rise of the World Economy
by Philip Coggan
Published 6 Feb 2020

Britain had a railway mania in the mid-1840s, when the creation of British companies still required an Act of Parliament; in 1846, 246 railway acts were passed in a single year.72 Those who invested in railway shares at the peak did not get their money back until the end of the century.73 That didn’t stop investors in other markets from trying their luck. Railways comprised 60% of all issued shares on the New York Stock Exchange in 1898. Once created, the limited liability company was widely adopted, but it was only in 1937 that an economist named Ronald Coase came up with a theory for why that was so. The key issue, he argued, was the complexity of the tasks involved. Some tasks are simple to organise – ordering a pair of horseshoes from a blacksmith, for example. But an entrepreneur might require the completion and the coordination of a wide range of different tasks in order to create a product.

Corporate Warriors: The Rise of the Privatized Military Industry
by Peter Warren Singer
Published 1 Jan 2003

Perhaps the best work on this was Coase's study of the history of lighthouses. Lighthouses used to be cited by economists as one of the few clear-cut examples, outside of national defense, of public goods that required the involvement of government. It turned out, however, that they were wrong and that even lighthouses were operated by private firms at one time. Ronald Coase, "The Lighthouse in Economics" Journal of Law and Economics 17 (October i974)=357-376- 12. Paul Taibel, "Outsourcing & Privatization of Defense Infrastructure." A Business Executives for National Security Report, L 998. Available at http^/w'wwbens.org/pubs/outsrce.html. 13. J. Michael Brower, "Outland: The Vogue of DOD Outsourcing and Privatization," Acquisition Review Quarterly 4 (Fall 1997): $83—392; Adam Smith, The Wealth of Nations, 1776.

Anarchy State and Utopia
by Robert Nozick
Published 15 Mar 1974

y Instead of compensating them, can the agent supply tranquilizers to all those upon whom the risk is imposed, so that they won’t feel very afraid? Should they have to tranquilize themselves, so that it’s not the agent’s concern at all if they neglect to do so and feel fear? For an illuminating initial tangling of such issues see Ronald Coase, “The Problem of Social Costs, ”Journal of Law and Economics, 1960, pp. 1—44. z The proposal I make here can, I think, be defended against the considerations adduced in Frank Michelman’s sophisticated presentation of a contrasting view in his “Pollution as a Tort,” an essay review of Guido Calabresi’s The Costs of Accidents, in Yale Law Journal, 80 (1917), pt.

Trust: The Social Virtue and the Creation of Prosperity
by Francis Fukuyama
Published 1 Jan 1995

At the same time, the people working within this hierarchy are supposed to cooperate, and not compete, against each other. This apparent contradiction between the competitive free market and the cooperative yet authoritarian firm was the starting point of a seminal article written in the 1930s by the economist Ronald Coase.11 Coase noted that the essence of the market was the price mechanism, which brought supply and demand into equilibrium, but that within the firm, the price mechanism was suppressed and goods were allocated by command. If the price mechanism was deemed so efficient, the question arose: Why did firms exist at all?

WTF?: What's the Future and Why It's Up to Us
by Tim O'Reilly
Published 9 Oct 2017

Today, on-demand companies like Lyft and Uber in transportation and Airbnb in hospitality bring a similar model to the physical world. Finnish management consultant Esko Kilpi beautifully describes the power of these new technology-enabled networks in an essay on Medium, “The Future of Firms.” Kilpi reflects on economist Ronald Coase’s theory of twentieth-century business organization, which explores the question of when it makes sense to hire employees rather than simply contracting the work out to an individual or small company with specialized expertise. Coase’s answer is that it makes sense to put people into one business organization because of the transaction costs of finding, vetting, bargaining with, and supervising the work of external suppliers.

The Price of Inequality: How Today's Divided Society Endangers Our Future
by Joseph E. Stiglitz
Published 10 Jun 2012

They may be in a position to nickel-and-dime those who suffer damage, since many people cannot hold out for adequate compensation, nor can they afford lawyers to match those of the company. One role of government is to rebalance the scales of justice—and in the case of the BP disaster, it did, but very gently, and in the end, it became clear that many of the victims were likely to receive compensation that was but a fraction of what they suffered.4 Ronald Coase, a Chicago Nobel Prize–winning economist, explained how different ways of assigning property rights were equally efficient for addressing externalities, or at least would be in a hypothetical world with no transactions costs.5 In a room with smokers and nonsmokers, one could assign the “air rights” to the smokers, and if the nonsmokers valued clean air more than the smokers valued smoking, they could bribe the smokers not to smoke.

Not Working: Where Have All the Good Jobs Gone?
by David G. Blanchflower
Published 12 Apr 2021

Actually we need more math.”39 That may be what economists do, but in the long run it isn’t sustainable as university presidents will soon realize it is better to hire folks working on pressing real-world issues, such as a cure for cancer. Economists need to do more empirical testing not less. Mathiness doesn’t do it. Economists have incentives to publish in top-tier journals rather than to solve real-world problems. But there is hope. Famously, Ronald Coase in his Nobel Prize lecture argued that “inspiration is most likely to come through the stimulus provided by the patterns, puzzles, and anomalies revealed by the systematic gathering of data, particularly when the prime need is to break our existing habits of thought” (1992, 718). In a recent column celebrating the award of the 2017 Sveriges Riksbank Nobel Economics prize to Richard Thaler, Robert Shiller, who won the prize in 2013, noted that there had been antagonism within the profession to the research agenda of the behavioral economists, which includes him.

Peer-to-Peer
by Andy Oram
Published 26 Feb 2001

Stubblebine, “Authentication Metric Analysis and Design,” ACM Transactions on Information Systems and Security, vol. 2, no. 2, pp. 138-158. [93] Philip Evans and Thomas Wurster (2000). Blown to Bits: How the New Economics of Information Transforms Strategy. Harvard Business School Press. [94] Ronald Coase (1960). “The Problem of Social Cost,” Journal of Law and Economics, vol. 3, pp. 1-44. [95] Clayton M. Christenson (1997) The Innovator’s Dilemma. Harvard Business School Press. Chapter 18. Security Jon Udell, BYTE.com, and Nimisha Asthagiri and Walter Tuvell, Groove Networks Security is hard enough in traditional networks that depend on central servers.

Aerotropolis
by John D. Kasarda and Greg Lindsay
Published 2 Jan 2009

The trend is to keep going, flinging ourselves ever farther into space, until we scatter completely, forming what Melvin Webber might have called companies without propinquity—maybe the next step in corporate evolution. Corporations have struggled with how and where to best arrange themselves since Henry Ford built the world’s biggest factory outside Detroit, then changed his mind and started taking it apart. In 1937, the economist Ronald Coase wrote “The Nature of the Firm,” exploring just how big a vertically integrated one like Ford’s might get. Not much bigger, he argued, because beyond a certain point, the drag of managing huge organizations over long distances would offset any advantages of scale. Size mattered, however, if advances in transportation, communication, and management techniques could shrink these distances and di-minish the drag.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

His main competitor for conservative attention, Ayn Rand, a Russian-Jewish immigrant, was more romantic than analytical—her reputation depended on her novels far more than her philosophical essays. Friedman’s popularity also eased the path toward acceptability for complex analyses made by some of his controversial rightist economist colleagues, such as James Buchanan and Ronald Coase, who also advocated minimal government regulation and oversight. Friedman remained the avatar of the conservative cause, however. He embarked on an intellectual adventure, doing seemingly fearless battle in academia and the halls of political power with the best minds of his time. Without him, the nation’s newly harsh attitudes toward government would not have become nearly as respectable or as popular.

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?
by Steve Keen
Published 21 Sep 2011

He was therefore more concerned to show that markets will clear automatically via price adjustments in response to positive or negative excess demand – a property that he labeled ‘tatonnement’ – than to prove that a unique set of prices and quantities is capable of clearing all markets simultaneously. By the time we got to Arrow and Debreu, however, general equilibrium theory had ceased to make any descriptive claim about actual economic systems and had become a purely formal apparatus about a quasi economy. It had become a perfect example of what Ronald Coase has called ‘blackboard economics,’ a model that can be written down on blackboards using economic terms like ‘prices,’ ‘quantities,’ ‘factors of production,’ and so on, but that nevertheless is clearly and even scandalously unrepresentative of any recognizable economic system. (Blaug 1998) A hobbled general It is almost superfluous to describe the core assumptions of Debreu’s model as unrealistic: a single point in time at which all production and exchange for all time is determined; a set of commodities – including those which will be invented and produced in the distant future – which is known to all consumers; producers who know all the inputs that will ever be needed to produce their commodities; even a vision of ‘uncertainty’ in which the possible states of the future are already known, so that certainty and uncertainty are formally identical.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

Worse, they might be programmed or choose to favor some groups in society over others, possibly reflecting a capacity within big business to influence the rules of the game of politics itself. Economists who opposed the regulatory state offered their own solution: address market failures by taking steps toward more complete markets. Coase versus Pigou: Property Rights and Transaction Costs In 1960 Ronald Coase, a British-born economist working in Chicago, explained how regulatory interventions were not warranted where, instead, property rights could be clarified (or created) and where the transaction costs of enforcing those rights were low (theoretically zero). Such legal rights could be traded and hedged via markets, opening up the option of the work of regulation being performed instead by the law of contract and of torts enforced via the courts: as typically put, private choice rather than public choice.

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite
by Duff McDonald
Published 24 Apr 2017

“The business schools conspired to accelerate this trend to ignore the big picture, wiping out the ‘general management’ syllabus and replacing it with specialist curricula. One interesting result is that none of the faculty bothers to claim to understand (or research) the firm as a whole. They thereby conspire to forget [Ronald Coase’s fundamental questions about the nature of the firm itself]—‘Why do firms exist?,’ ‘Why are their boundaries where they are?,’ ‘Why are their internal arrangements as they are?,’ and ‘Why is their performance so varied?’ Instead business school teachers happily presume answers to these questions and fiddle around at their edges and theorize marginal improvements.”8 It’s heady stuff, but it’s also incredibly important.

The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (The Princeton Economic History of the Western World)
by Robert J. Gordon
Published 12 Jan 2016

Lack of access to computers and the Internet inside the home greatly handicap the efforts to succeed in school of students whose families live in poverty, for they are competing with the majority of students, who have computers at home and who have parents who show how to use them. Internet illiteracy, the inability to navigate through this new source of learning and information, creates a handicap that can last a lifetime. Another less familiar problem is that we may be creating too much data. Ronald Coase, a University of Chicago economist who won the Nobel Prize, long ago warned that “if you torture the data long enough, it will confess to anything.” Information on the Internet is bountiful and varied, but for all the valuable resources, there are flawed resources as well. At the level of students from elementary school to college, the Internet makes possible Internet bullying.

Networks, Crowds, and Markets: Reasoning About a Highly Connected World
by David Easley and Jon Kleinberg
Published 15 Nov 2010

Communication and coordination in social networks. Review of Economic Studies, 67:1–16, 2000. [110] Michael Suk-Young Chwe. Rational Ritual: Culture, Coordination, and Common Knowledge. Princeton University Press, 2001. [111] Edward H. Clarke. Multipart pricing of public goods. Public Choice, 11:17–33, Fall 1971. [112] Ronald Coase. The problem of social cost. Journal of Law and Economics, 1:1–44, 1960. [113] Jere M. Cohen. Sources of peer group homogeneity. Sociology in Education, 50:227–241, October 1977. [114] James Coleman, Herbert Menzel, and Elihu Katz. Medical Innovations: A Diffusion Study. Bobbs Merrill, 1966.

Artificial Intelligence: A Modern Approach
by Stuart Russell and Peter Norvig
Published 14 Jul 2019

The 2007 Nobel Memorial Prize in Economics went to Hurwicz, Maskin, and Myerson “for having laid the foundations of mechanism design theory” (Hurwicz, 1973). The tragedy of the commons, a motivating problem for the field, was analyzed by William Lloyd (1833) but named and brought to public attention by Garrett Hardin (1968). Ronald Coase presented a theorem that if resources are subject to private ownership and if transaction costs are low enough, then the resources will be managed efficiently (Coase, 1960). He points out that, in practice, transaction costs are high, so this theorem does not apply, and we should look to other solutions beyond privatization and the marketplace.