Tuesday, September 17, 2013

Medema on Coase

Steve Medema has a fine remembrance of Coase and his work at Vox (here). I especially how Medema exposes the contradiction of those who (1) observe that Coase opposed "blackboard" economics, while (2) suggesting that his primary contribution was the so-called "Coase theorem." As Medema notes, " the ‘Coase theorem’... is in many respects the height of ‘blackboard economics....’" In fact, it was merely Coase's restatement of the basic assumptions of the neoclassical economic theory (including the usually unstated assumption of zero transaction costs), which Coase sought to displace with his new institutional approach, based on the existence of ubiquitous and often quite high transaction costs.

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