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The Elgar Companion to Ronald H. Coase

The Elgar Companion to Ronald H. Coase

Edited by Claude Ménard and Elodie Bertrand

Ronald H. Coase was one of the most innovative and provocative economists of the twentieth century. Besides his best known papers on ‘The Nature of the Firm’ and ‘The Problem of Social Cost’, he had a major role in the development of the field of law and economics, and made numerous influential contributions to topics including public utilities, regulation and the functioning of markets. In this comprehensive Companion, 31 leading economists, social scientists and legal scholars assess the impact of his work with particular reference to the research programs initiated, the influence on policymakers, and the challenge to conventional perspectives.

Chapter 18: Coase and the regulation of public utilities

John Groenewegen and Piet de Vries

Subjects: economics and finance, history of economic thought, industrial organisation, institutional economics, law and economics, law - academic, law and economics


Coase, in his writings on public utilities, proved very sceptical about government intervention, for instance the creation of state monopolies or the regulation3 of prices of postal services, and demonstrated a conviction that ‘the normal economic system works itself ’ (Coase 1937: 392). In 1930 this was brought home to junior student Ronald Coase by his London School of Economics professor Arnold Plant. Coase wrote: ‘Plant also explained that governments often served special interests, promoted monopoly rather than competition, and commonly imposed regulations which made matters worse’ (Coase 1988 [1991]: 37). In this chapter we explore how Coase analysed the working of the real economy of public utilities. We will demonstrate how Coase investigated the way regulators intervened (he warned against regulatory risk and regulatory capture), how the rationales to create state monopolies changed over time, how market actors constantly disturb the state interventions through their innovations and finally what, according to Coase, were the effects of regulation on the performance of the public utilities.

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