Perspectives from New Institutional Economics
Edited by Claude Ménard
Chapter 7: Ronald H. Coase and the emergence of a new approach to economics
Claude Ménard According to Virginia Woolf, ‘On or about December 1910, human character changed’.1 This is when Ronald Coase was born! I do not know whether human character has changed much since then, but economics surely has. Looking at Coase’s curriculum vitae over the following 80 years, we ﬁnd listed the now famous papers that contributed to remodeling contemporary economic theory, from ‘The nature of the ﬁrm’ (1937) through ‘The marginal cost controversy’ (1946), to ‘The problem of social cost’ (1960). But the list of references also contains much less often quoted papers that are highly signiﬁcant, either because they fertilized the more synthetic and more abstract papers, or because they transformed deeply the approach to public policy. These contributions have already been very inﬂuential, and they are far from having produced their full impact. Ideas developed by Coase, some of them more than 60 years ago, have been progressively integrated into our intellectual landscape, albeit against some resistance. Their diffusion has been and remains remarkably slow. It was only in the 1970s that ‘The nature of the ﬁrm’ became fully perceived for what it really is: a revolution in our way of thinking about ‘the institutional structures of production’ that constitute the bones and ﬂesh of market economies. Its dissemination actually beneﬁtted from the controversy about the more recent ‘Problem of social cost’. But it is also remarkable that this latter paper gave rise to a persistent misunderstanding, as Coase himself repeatedly noted: most readers...
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