People who follow me on Twitter could guess I greatly admired Ronald Coase and his work in economics. On top of having a long productive career, he also had some of the most important articles of the 20th century. He kept publishing as a centenarian. As a Nobel Prize winner, he had nothing to prove anymore. That inspired at least one young scholar.
My RSS feed was all about Coase over the last two days. People are discussing his impact and proper interpretations. Robert Higgs explains how Coase rightfully fought against the trends in economics over the last 80 years. David Henderson did a beautiful tribute for the WSJ. Don Boudreaux places Coase in his top ten economists. Daniel Kuehn has important food for thought on Coase in posts here, here, and here. Jonathan Finegold gives Coase an incredible compliment which I wish I would have wrote-
I don’t know if I have what it takes to be a good economist, but I do know that without Coase my chances would be smaller. Many of you are probably smarter than me, but I still think he can do the same for you. (HT Daniel Kuehn)
I have nothing to add to the topic of the naïve Coase theorem vs Pigou vs McCloskey. Anyone who wants to read more into that can check my twitter and get an overview my beliefs. I, instead, want to explain Coase's importance in my intellectual journey.
About a year after discovered the world of economics, I started to write a blog post called "10 Books, 10 Articles, 1 Year, and 1 New Life". Unfortunately, I never published it. In that (unpublished) post, I attempted to explain how 10 economics books and 10 articles changed my worldview. Ultimately, these 20 items started a new path in my life towards academic economics.
In these two lists, Coase had a unique place. His book, The Firm, the Market, and the Law, made my book list, while The Nature of the Firm and The Problem of Social Cost (both within the book) made my article list.
Unlike Jonathan, I have never been introduced to Coase "formally". Instead, I had to stumble my way blindly through my early reading of Sowell to Stigler to Coase. If I trust Goodreads, I finished reading The Firm, the Market, and the Law in November 2011. Searching the library (I was suspicious of journals) I discovered this book. While the exact details in the articles have blurred over time, the feeling of wonder and amazement has not. My mental image of reading that book in the St. Olaf library still exists. The small paperback book combined with Coase's friendly, easy style, hooked me. His work dismantled previous views and created new horizons.
Coming from an appreciation of the pricing process which I developed from my early readings of Mises, Hayek, and Rothbard, The Nature of the Firm, shook my foundations. One of the great developments of modern free economies, the firm, is an almost totalitarian entity. Why did people in a free society not use the pricing mechanism? As I tweeted yesterday, this insight, so obvious in retrospect, was not elaborated until 1937! My naive worldview of a voluntary/involuntary dichotomy could not longer exist. Instead, the world was much more complex and, hence, interesting. My eyes were opened, if only a little.
The Problem of Social Cost was less disturbing of my worldview, but equally insightful. Coase teaches us all here that the real world is complex (duh). The "blackboard" economics of textbook Pigou or zero-transaction costs does not exist. Therefore, economists cannot predict where the equilibrium will settle. Instead, the interplay of states, property rights, informal rules, and individuals leads to unique outcomes in each situation. Again, proper economics is an invitation to inquiry.
I am not a good economist yet. But like Jonathan, I am a better one because of Coase.