Ronald Coase passed away yesterday, four months shy of his 103rd birthday and working right up to the end. An archive search here shows how deeply Coase’s work influences Mike’s and mine, and we are not alone — Coase was one of the most influential economists of the 20th century, an influence made even more striking by the fact that it derives from relatively few publications. Few, but subtle and nuanced, and blockbuster. I cannot think of any aspects of my research that his work has touched, and his method of analyzing and thinking through problems also informs most of my teaching and research, and writing more generally.
Some appreciations of Coase come from Peter Klein, Geoff Manne, Jonathan Adler (on Coase and Ellickson and on Coase and externalities, the second being a must read), Todd Zywicki (making the essential point about the subtlety of Coase’s argument that costs are reciprocal), and Northwestern’s own Kevin Bryan. David Henderson also excerpts a quote of Coase’s that I find particularly inspiring in suggesting how we should engage in economic analysis:
Testable predictions are not all that matters. And realism in our assumptions is needed if our theories are ever to help us understand why the system works the way it does. Realism in assumptions forces us to analyze the world that exists, not some imaginary world that does not.
Given the recent debate around “economath” and the Rosenberg/Curtain NYT commentary about economics not being a science because it fails to generate testable predictions (which is a very narrow and not widely-held definition of science, I think), Coase’s observation is apt — strong assumptions to enable excessive formalism in our theory formation reduce our ability to use our models to understand how the world works, and that’s a tradeoff that we confront constantly.
I honor Coase’s long, richly-lived life, and the important new ways of thinking about and understanding the world that his work has enabled.
UPDATE: Pete Boettke and I were clearly working in parallel, and he posted this excellent observation about Coase’s contributions to new institutional economics and robust political economy at the same time I did. Pete also points to the 1959 FCC paper, which I think is one of Coase’s best and is quite underappreciated for many reasons (and I’ve written about a lot here before, particularly regarding modern spectrum policy).