Ronald Coase, Nobel Prize-winning economist, dies at 102

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Washington: Ronald Coase, the British-born University of Chicago economist whose Nobel Prize-winning work on the role of corporations stemmed from visits in the early 1930s to American companies including Ford Motor Co. and Union Carbide, has died. He was 102.

He died on Monday at St. Joseph Hospital in Chicago, according to a news release from the University of Chicago. No cause was given.

The Royal Swedish Academy of Science awarded Coase the 1991 Nobel in economics for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.

Unusual for an economist, Coase had concluded early in life that mathematics was not to my taste. So he built his career offering insights on the legal precepts and institutions, such as the corporation, on which the field is built. He was one of the first economists to treat the size and function of companies as a subject worthy of more than incidental attention.

Coase is one of the most influential economists of his day, Oliver Williamson and Sidney Winter wrote in a 1993 book on his work. His seminal thinking has pushed economics to reconsider its primitives. Williamson, a student of Coase, won the Nobel in economics in 2009.

Coase’s 1937 article, The Nature of the Firm, explained how the costs of economic transactions—including time, fees, and what became known generally as overhead—determine the size of the companies that arise to carry out the transactions.

New ideas

The Nobel committee wrote that Coase showed that traditional basic microeconomic theory was incomplete because it only included production and transport costs and neglected the costs of entering into and executing contracts and managing organizations. This new way of thinking had implications for corporate and contract law as well as for the structure of the financial system.

 

 

Coase further explored transaction costs in a 1960 paper, The Problem of Social Cost, which examined how to address harm caused by business, such as pollution from a factory. Holding the company liable and ordering it to pay money to an affected property holder is less likely to yield an optimal result than having the parties negotiate, he wrote.

 

 

“All it says is that the people will use resources in the way that produces the most value, that’s all,” Coase said of the theorem in an interview with Reason magazine published in 1997. “I still think it’s an obvious point. You wouldn’t think there was a need for a Coase Theorem, really.”

 

 

 

AKANKSHA SHANU

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