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.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Massage Therapist / Sports Therapist / Physio / Osteopath

£12000 - £24000 per annum: Recruitment Genius: An opportunity has arisen for o...

Recruitment Genius: Account Manager / Sales Executive - Contract Hire

£35000 - £60000 per annum: Recruitment Genius: This industry leader provides c...

Recruitment Genius: Project Coordinator

£28000 - £30000 per annum: Recruitment Genius: A Project Coordinator is requir...

Recruitment Genius: Area Sales Manager - Midlands

£20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most