Last month, Ronald Coase published a terrific short article in the Harvard Business Review (here), "Saving Economics from the Economists," in which he called on academic economists to stop treating all economic activity as a simplistic application of price theory and "reengage the severely impoverished field of economics with the economy." To promote that goal, Coase, at age 102, is planning to launch a new economics journal to be called, "Man and the Economy." Bloomgberg Businessweek has the story here.
It's not that Coase opposes economic theory as such. After all, he has made several fundamental contributions to economic theory starting with his seminal 1937 article, "The Nature of the Firm" (even if other economists did not notice or appreciate its insights for 20 years or more after it was published). Coase's real beef is with theory that is not grounded in, or ever corrected by, empirical observation.
I have one bone to pick with the Bloomberg article for suggesting that the kind of journal Coase wants to start already exists, citing the Real-World Economics Review (here) as an example. That journal is an outgrowth of the "post-autistic economics" movement that started in France more than a decade ago. Unlike Coase, many (if not most) members of that movement reject neoclassical economics in its entirety, including elements such as price theory that have obvious importance to any realistic theory of economic activity. The author should have made clear that Coase is no more likely to find common ground with those scholars than with pure neoclassical theorists. He is no more likely to support throwing out price theory than he is to rely on it exclusively as a basis for predicting economic behavior.
Coase is a founder (along with Douglass North) of the New Institutional Economics, which seeks to reconcile the valuable insights of neoclassical theory (including price theory) with observed deviations from the conventional assumptions of the neoclassical model. It does so by, among other things, relaxing or eliminating neoclassical assumptions, in accordance with lessons from behavioral theory (based on the works of Herbert Simon, Daniel Kahneman, and others), and by focusing on the important role that institutions (the "rules of the game" as Doug North refers to them) play in affecting economic outcomes. In contrast to the "post-autistic economics" crowd, the New Institutionalists (including Coase) avoid throwing out the baby with the bathwater.
I hope Coase gets his journal up and running. If he does, I predict we will never see in it an article purporting to test or apply the "Coase theorem" or purporting to study the effects of "Coasian bargaining."
Thanks to Gerard Magliocca for pointing me to the Bloomberg Businessweek story.