Professor Ronald Coase: Economist who won the Nobel Prize

 

Ronald Coase, who received the 1991 Nobel Prize in economics for observations that expanded economics to include the law and broadened legal theory to encompass the "dismal science", was one of the most influential economists in generations. He said he became a economist through a "series of accidents" and for years seemed destined for a respectable but not remarkable career. Only later did other economists and legal philosophers, as well as judges and government regulators, fully realise the importance of the theories he had begun developing years before.

"I was then 21 years of age and the sun never ceased to shine," he said in his Nobel lecture, referring to a talk he that became the basis for his influential essay "The Nature of the Firm". "I could never have imagined that these ideas would become some 60 years later a major justification for the award of a Nobel Prize. And it is a strange experience to be praised in my eighties for work I did in my twenties."

"The Nature of the Firm" (1937) sought to explain how and why firms exist. "The Problem of Social Cost" (1960) laid out a theory for managing societal ills caused by industry, such as pollution. The works wove together economics and the law and summoned academics and policymakers to consider the marketplace in novel ways.

Coase began his research for "The Nature of the Firm" as a student at the London School of Economics, who gave him a scholarship to travel to the US to study American industries. He wanted to know why certain industries, such as the car industry, feature only a few major corporate players while others have numerous small-scale firms. His answer lay in "transaction costs", including the time and expense of hiring personnel, acquiring raw materials and marketing.

Some companies believe in controlling all steps in the production chain: Ford once bought a rubber plantation rather than rely on a contractor for tyres. But in the internet era many firms have found contracting to be more cost-effective; in making that calculation, they are wittingly or unwittingly relying on Coase's insights.

By the late 1950s, Coase had fully moved to the US. In 1958 he stunned leading economists when he submitted a paper, "The Federal Communications Commission", to the University of Chicago economics department. He argued that in fields such as broadcasting the government could create a new marketplace by granting tradable rights for goods such as radio frequencies.

Aaron Director, founder of the Journal of Law and Economics, which Coase would later lead, invited Coase to the University of Chicago to defend his thesis before 21 thinkers, including Milton Friedman and George Stigler, who held a fundamentally different view of government's role in society. The economists initially voted 20 to 1 against Coase, but in a few hours he persuaded all to join his camp.

Coase elaborated on his ideas in The Problem of Social Cost (1960), a seminal work on the relationship between government and the marketplace. He argued that the market could be trusted to sort out environmental and other disputes without excessive government intervention. For example, initiatives such as cap-and-trade permits might control pollution as efficiently as government regulation and enforcement. Because of the forward-looking nature of such ideas, Coase's work remained relevant until the end of his life. He co-wrote How China Became Capitalist the year he turned 101.

The Nobel committee honoured him for the "discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy." Coase said, "My contribution to economics has been to urge the inclusion in our analysis of features of the economic system so obvious that ... they have tended to be overlooked."

He was born in 1910, in Willesden, north London, the son of post office workers. As a boy he had to wear leg braces and attended what he described as a "school for physical defectives" before moving to a mainstream secondary school; his frailty pushed him away from sports and toward academics. At the LSE he studied under the noted economist Arnold Plant and during the Second World War he was a statistician in the war cabinet. He settled in the US in 1951 and taught at institutions including the University of Virginia before joining the University of Chicago in 1964.

He remarked on the tendency of ideas to move in and out of favour. "A scholar must be content with the knowledge that what is false in what he says will soon be exposed and, as for what is true, he can count on ultimately seeing it accepted, if only he lives long enough." At 102 he was the oldest-living Nobel laureate.

Ronald Harry Coase, economist: born 29 December 1910; Nobel Prize for Economics 1991; married 1937 Marian Hartung (died 2012); died Chicago 2 September 2013.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
peopleBenjamin Netanyahu trolled by group promoting two-state solution
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Life and Style
fashionEveryone, apparently
Voices
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
art
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Sport
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
tech
Extras
indybest
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Secondary teachers required for supply roles in Sudbury

£21000 - £35000 per annum: Randstad Education Cambridge: Secondary teachers re...

Senior Marketing Executive (B2C, Offline) - Wimbledon

£28000 - £30000 per annum + benefits: Ashdown Group: A highly successfully con...

Marketing Executive (B2C, Offline) - Wimbledon, SW London

£23000 - £25000 per annum + benefits: Ashdown Group: An established and highly...

Financial Controller

£60000 - £75000 per annum: Sauce Recruitment: This is a busy and varied role w...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style