September 14, 2022
Recently, I stumbled on Robert Higgs remembrance of Ronald Coase a year after Coases’ death:
“At the University of Washington, where I taught from 1968 to 1983, Coase’s work inspired a great deal of important work by Douglass C. North and Robert Paul Thomas (1973), North alone (1981, 1990), Yoram Barzel (1989), Steven N. S. Cheung (1969, 1973), and others, including myself.
These guys weren’t invested in exegetical battles:
“Like the economists working along similar lines at the University of California at Los Angeles as well as at Virginia, Rochester, and Chicago, we did not agonize over the correct interpretation of what George Stigler had dubbed “the Coase Theorem” or fret about the propriety of Coasian judges assigning property rights to promote efficient outcomes, but rather for the most part we took up the challenge of empirical research aimed at finding and analyzing overlooked market arrangements in cases where mainstream economists had alleged the prevalence of market failures.”
Applied work was king:
“For example, Cheung (1973) revealed that bees do not always provide uncompensated pollination services and thereby generate a market failure, as neoclassical welfare economists had claimed, but instead that bee keepers enter into elaborate contracts with orchard owners to provide such services in exchange for substantial, well-specified fees. Cheung and I as well as my Washington Ph.D. student Lee Alston revived the analysis of sharecropping and other agricultural land-tenure arrangements to show that the market failures long alleged to attend such arrangements have generally not occurred and that landowners and tenants have instead entered into a great variety of contracts aimed at the establishment of incentives to allocate resources efficiently (Cheung 1969; Higgs 1973, 1974; Alston and Higgs 1982). Later on, many others pursued research along similar lines. My most recent work in this area shows how mine and mill operators in the important Coeur d’Alene (Idaho) mining district took a variety of innovative technological and contractual actions to internalize the externalities otherwise associated with the disposal of wastes generated in the mining, milling, and smelting of heavy metals (Higgs 2012).”
Important lessons here.
1.
The literature on “defining” the Coase Theorem and exegeting “what Coase meant” is enormous. See Medema’s magisterial and lengthy survey in the JEL. Yet, I’m not clear what pattern predictions hang in the balance based on alternative approaches to what Coase really meant. Perhaps someone can enlighten me here.
2.
Yes, there’s textual justification in Coase (1937) for the idea that the judge play central planner with property rights. This has been appropriately criticized. However, this is not the only lesson in Coase. Better, says Higgs, to focus our analytical attention on asking: “where are the deals?” Here are a few good examples from Peter Klein and Dick Langlois of that approach in action: Wrigley Field. Colorful homes. Jack Daniels.
3.
Stop exegeting the greats. Start using their framework for analysis for the real world. Hard to think of something else that would bring a bigger smile to the face of “blackboard economics” biggest critic.