Chapter 20: Emerging markets: what can we learn from Ronald Coase?
The most lasting lesson from the life and work of Ronald Coase may well be his persistent vision of economics and a distinct research program it entails. Over his long and illustrious career, Coase tenaciously criticized modern economics for first ignoring and later altogether denying its subject matter, the working of the economic system, in which wealth is created in society through the division of labor, free enterprises and exchange. As a result, what we find in the vast modern economics literature is “the circulation of the blood without the body” (Coase 1998: 73; 2002). The “body economic” Coase had in mind is what he termed “the institutional structure of production” (Coase 1992). In emerging markets, what is emerging and currently wanting includes legal institutions protecting property rights and enforcing contracts, and a regulatory framework reducing uncertainty and fostering competition. Together with the network of firms and markets, the legal and regulatory systems make up the economic body, which determines the extent of the market and the cost of transaction, ultimately responsible for generating the low of goods and services in an economy and thus dictates material wellbeing in society.
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