Interview with Ronald Coase, on the occasion of the establishment of the Coase China Society, an effort to stimulate study and application of Coase’s ideas in China. Interview conducted by Wang Ning, a student of Coase’s now teaching at Arizona State University and co-author with Coase of the book How China Became Capitalist.
HT to Paul Walker of Anti-Dismal.
A few selections illustrating Coase’s views on Coasean economics, experimentation and institutional reform, and where Hayek had a good point:
WN: You mentioned many times that you do not like the term, “Coasean economics”, and prefer to call it simply the “right economics” or “good economics”. What separates the good from bad, the right from wrong?
RC: The bad or wrong economics is what I called the “blackboard economics”. It does not study the real world economy. Instead, its efforts are on an imaginary world that exists only in the mind of economists, for example, the zero-transaction cost world.
Ideas and imaginations are terribly important in economic research or any pursuit of science. But the subject of study has to be real.
WN: The second question many Chinese have in mind for you is, what you think other countries can learn from the Chinese experience of market transformation? Is there any general lesson to be learned from the China model?
RC: I don’t know. You don’t know what you can learn until you try to learn.
WN: I think this point is critically important. If I understood correctly, you are saying that learning from China or any other example is not like learning from a book or cooking recipe, but more like learning by doing. If the Chinese economic reform is an experiment, learning from China remains an experiment. Different countries will learn different things even if they learn from the same model.
RC: Exactly. What we do is all experiment.
RC: Nothing guarantees success. Given human fallibility, we are bound to make mistakes all the time.
WN: So the question is how we can learn from experiments at minimal cost. Or, how could we structure our economy and society in such a way that collective learning can be facilitated at a bearable price?
RC: That’s right. Hayek made a good point that knowledge was diffused in society and that made central planning impossible.
WN: The diffusion of knowledge creates another social problem: conflict between competing ideas. To my knowledge, only people fight for ideas (religious or ideological), only people are willing to die for their ideas. The animal world might be bloody and uncivilized. But animals, as far as we know, do not fight over ideas.
RC: That’s probably right. That’s why we need a market for ideas. Ideas can compete; people with different ideas do not need to slaughter each other.