Professor Ronald Coase, passed away at 102

Dr.Ronald Coase, was perhaps the only economics professor who lived such a long years upto 102 rather its more than a 101 economics. He passed away on September 2, 2013. He won the Nobel Memorial Prize for Economics in the year 1991 for his work on "for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy".

I am a long admirer of his work on property rights. Prof Coase was also admirer of Prof F A Hayek's idea of choices in currencies and against of monopoly legal tender. 

Read this paper titled "Other things equal: the so called coase theorem".

His very opening line of his Nobel lecture was very candid. He begun by saying:

• "In my long life I have known some great economists but I have never counted myself among their number nor walked in their company. I have made no innovations in high theory. My contribution to economics has been to urge the inclusion in our analysis of features of the economic system so obvious that,..."

"in a 60-year career he wrote only about a dozen significant papers and used little or no mathematics, yet his impact on his discipline was profound."

Here are some obituaries links:

The life and legacy of Ronald Coase
Ronald Coase : 1910 – 2013
RONALD COASE AND THE MISUSE OF ECONOMICS

Nobelist Who Studied Corporations
Remembering Ronald Coase
Ronald Coase has died, but his individualist dogma is everywhere

After Hayek, it’s now Coase

Many years ago Chinese Hayek Society was formed and it continuously organizes Annual Meeting of the Chinese Hayek Society. See here for last year meeting.
Now Coase China Society is underway. It is great news for China!!

Literally I am nervous!! After reading this news, when India will have such Societies? Of course my inner feeling tells me that, look the same India is (yesterday years) is not bothered about its own men like Prof.B.R Shenoy, Rajaji, etc how can one think of Hayek, Coase, Milton Friedman?

Best at 100

Coase's specialty is the economics and law of property rights. He brilliantly explained how private property rights give us incentives to cooperate productively in ways that went largely overlooked before he pointed them out. Before Coase published his most famous article -- his 1960 classic "The Problem of Social Cost" -- scholars never realized that (as I like to put it) legal rights are like cars.

But pioneering work is rarely presented cleanly, and Coase is a true pioneer. 

Happy birthday Professor Ronald Coase

So, we are here to A Celebration of the Mind and Work of Ronald Coase

The genius of The Nature of the Firm turns 100

As I have posted here the Economist now has a piece (Why do firms exist? Ronald Coase, the author of “The Nature of the Firm” (1937), turns 100 on December 29th) on the grand giant firm theory revolutionary figure: Professor Ronald Coase who is going to turn 100 year by next week.

Few excerpts from the piece:

• Today most people live in a market economy, and central planning is remembered as the greatest economic disaster of the 20th century. Yet most people also spend their working lives in centrally planned bureaucracies called firms.

• The man who restored the pin factory to its rightful place at the heart of economic theory celebrates his 100th birthday on December 29th. The economics profession was slow to recognise Ronald Coase’s genius. He first expounded his thinking about the firm in a lecture in Dundee in 1932, when he was just 21 years old. Nobody much listened. He published “The Nature of the Firm” five years later. It went largely unread. 

• But Mr Coase laboured on regardless: a second seminal article on “The Problem of Social Cost” laid the intellectual foundations of the deregulation revolution of the 1980s. Eventually, Mr Coase acquired an army of followers, such as Oliver Williamson, who fleshed out his ideas. In 1991, aged 80, he was awarded a Nobel prize. Far from resting on his laurels, Mr Coase will publish a new book in 2011, with Ning Wang of Arizona State University, on “How China Became Capitalist”. 

• How much light does “The Nature of the Firm” throw on today’s corporate landscape? The young Mr Coase first grew interested in the workings of firms when he travelled around America’s industrial heartland on a scholarship in 1931-32. He abandoned his textbooks and asked businessmen why they did what they did. He has long chided his fellow economists for scrawling hieroglyphics on blackboards rather than looking at what it actually takes to run a business. So it seems reasonable to test his ideas by the same empirical standards. 

• Mr Coase’s theory continues to explain some of the most puzzling problems in modern business. Take the rise of vast and highly diversified business groups in the emerging world, such as India’s Tata group and Turkey’s Koc Holding. Many Western observers dismiss these as relics of a primitive form of capitalism. But they make perfect sense when you consider the transaction costs of going to the market. Where trust in established institutions is scarce, it makes sense for companies to stretch their brands over many industries. And where capital and labour markets are inefficient, it makes equal sense for companies to allocate their own capital and train their own loyalists.

So, countdown for run upto 100 year old Professor Ronald Harry Coase!!

At last, the winty December has come, wait!!

"Human beings have, since time immemorial, taken the credit for whatever has gone right while shifting the blame for all that has gone wrong to the unfortunate year! Thus, 1992 was described by the British monarch Queen Elizabeth II as annus horribilis, Latin for a horrible year that saw not just a fire in the royal home of Windsor Castle but an announcement in December of the formal separation of the Prince and Princess of Wales.

In India, which philosophically takes a much, much longer perspective of happenings, everything bad is attributed to the world currently going through an age called kaliyuga, which is aeons removed from nobler eras in a very distant past.

Those who are not philosophically inclined take a much simpler view. Instead of ruminating about why things have gone wrong, they prefer to plan out where they should see the last sunset of the old year or the first sunrise of the new one." (From ET see here)

Yes I have been watching and reading ever since I presented a research paper at the NIRD Foundation Seminar in 2006 in November (also got some cash award for the paper!!!) when this month will come, it now says ‘I am here’!! The research paper was on environment and private property rights and human action.

Before posting next big quote let’s say one thing which I wanted to share with you. Professor Ronald Coase is the only economist who is going to celebrate his 100th birthday by end of this month!! and too after winning Nobel Prize in Economic Sciences. Long live Professor Coase!!!

From Library of Economics and Liberty:

• Ronald Coase received the Nobel Prize in 1991 “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.” Coase is an unusual economist for the twentieth century, and a highly unusual Nobel Prize winner. First, his writings are sparse. In a sixty-year career he wrote only about a dozen significant papers—and very few insignificant ones. Second, he uses little or no mathematics, disdaining what he calls “blackboard economics.” Yet his impact on economics has been profound. That impact stems almost entirely from two of his articles, one published when he was twenty-seven and the other published twenty-three years later.

• Coase conceived of the first article, “The Nature of the Firm,” while he was an undergraduate on a trip to the United States from his native Britain. At the time he was a socialist, and he dropped in on perennial Socialist Party presidential candidate Norman Thomas. He also visited Ford and General Motors and came up with a puzzle: how could economists say that Lenin was wrong in thinking that the Russian economy could be run like one big factory, when some big firms in the United States seemed to be run very well? In answering his own question, Coase came up with a fundamental insight about why firms exist. Firms are like centrally planned economies, he wrote, but unlike the latter they are formed because of people’s voluntary choices. But why do people make these choices? The answer, wrote Coase, is “marketing costs.” (Economists now use the term “transaction costs.”) If markets were costless to use, firms would not exist. Instead, people would make arm’s-length transactions. But because markets are costly to use, the most efficient production process often takes place in a firm. His explanation of why firms exist is now the accepted one and has given rise to a whole literature on the issue. Coase’s article was cited 169 times in academic journals between 1966 and 1980.
• “The Problem of Social Cost,” Coase’s other widely cited article (661 citations between 1966 and 1980), was even more pathbreaking; indeed, it gave rise to the field called law and economics. Economists before Coase of virtually all political persuasions had accepted British economist Arthur Pigou’s idea that if, say, a cattle rancher’s cows destroy his neighboring farmer’s crops, the government should stop the rancher from letting his cattle roam free or should at least tax him for doing so. Otherwise, believed economists, the cattle would continue to destroy crops because the rancher would have no incentive to stop them.

There is some interesting information about his childhood:

• Aged 11, I was taken by my father to a phrenologist. What the phrenologist said about my character was, I feel sure, determined less by the shape of my skull than by the impressions he derived from my behaviour. Out of the various printed summaries of character in his booklet, that chosen for "Master Ronald Coase" started: "You are in possession of much intelligence, and you know it, though you may be inclined to underrate your abilities." This printed summary also included the following remarks: "You will not float down, like a sickly fish, with the tide... you enjoy considerable mental vigour and are not a passive instrument in the hands of others. Though you can work with others and for others, where you see it to your advantage, you are more inclined to think and work for yourself. A little more determination would be to your advantage, however." In the written comments, the pursuits recommended were: "Scientific and commercial banking, accountancy. Also, horticulture and poultry-rearing as hobbies." Added were some comments about my character: "More hope, confidence and concentration required - not suited for the aggressive competitive side of business life. More active ambition would be beneficial." It was also noted that I was too cautious. It was hardly to be expected that this timid little boy would one day be the recipient of a Nobel Prize. That this happened was the result of a series of accidents.

Some of his important works:

1. The Nature of the Firm
2. The Problem of Social Cost
3. The Institutional Structure of Production

For more see here

Adam Smith: An Enlightened Life

That is the new biography book by Nicholas Phillipson. I am posting full review by V V in the BS for record. Before you read the review article. I want you to know few things. Prof Ronald Coase is the longest living economist with Nobel Prize in Economics and he is going to be 99 by this December! Last year I have read the book Life of Adam Smith by John Rae and its worth to read and ponder the life of great philosopher of life.

V V: The wealth of Adam Smith

V V / New Delhi September 18, 2010, 0:03 IST Business Standard

The main activity of economists since 1776 has been to fill the gaps in Adam Smith’s system, to correct his errors and to make his analysis vastly more exact
—Ronald Coase, Nobel Prize Speech, 1991

• It is now widely accepted that biographies of great writers are interesting only insofar as they illuminate their work, and to do this effectively requires a discursiveness on the part of the biographer which alone would tell you what turned the writer on to do the work she did in her lifetime. Not to emphasise the work would be to reduce the biography to an exercise of hagiography like most of our biographies of the big and famous that tell us of lives too good to be true. Nicholas Phillipson’s Adam Smith: An Enlightened Life (Allen Lane/Penguin, Special Indian Price, Rs 899) places his work, widely regarded as the foundation of modern economics, firmly within the larger scheme to establish a grand “Science of Man” that encompassed law, history, aesthetics, economics and ethics — more a work of philosophy than of pure economics.

• Possibly because An Inquiry into the Nature and Causes of the Wealth of Nations (1776) was multidisciplinary and broadened the study that Adam Smith began in The Theory of Moral Sentiments nearly 20 years earlier in 1759, there has been no unanimity on what precisely his influence was based on. Was it because he was the masterly advocate of laissez faire? That he was opposed to every effort by a government to control the self-interested activities of individual economic actors, so granting the licence to greed and other vices, and malpractices, and quite content that markets should be the battlefield from which the most oppressive combatants would emerge as “victors”?

• Should the “Invisible Hand” of the market decide? What does his statement that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner but from their regard to their self-interest” really mean? Quite apart from the fact that these iconic statements can be interpreted in different ways, there is also the sad fact that not many economists have read The Wealth of Nations as a whole; they have snatched bits and pieces and drawn their half-baked conclusions that we have accepted as the truth because they came down to us from experts.

• The basic question we need to ask is whether Smith wholly approved of a society in which man’s economic activities are actuated by self-interest. In his Theory of Moral Sentiments, Smith had identified human perfection with virtue and virtue of the highest order with altruism. Phillipson’s biography provides a balanced picture of Adam Smith’s work against the background of the Scottish Enlightenment and the influence of his philosopher friend, David Hume. A good biography is itself a kind of a novel. Like the classic novel, a novel believes in the notion of a “life, a story that begins at birth, moves on to a middle part, and ends with the death of the protagonist”. So, it is here but it is primarily “an intellectual biography, one which traces the development of his mind and character through his published and unpublished texts, one that is set in a country that was generating its own form of Enlightenment”. Phillipson succeeds in showing that all of Smith’s writings make up a single coherent whole. He begins by giving a compact account of Smith’s life and times and of the intellectual traditions that he drew on and modified.

• Given this background, Phillipson turns to his central undertaking, pointing out that, according to Smith, a commercial society tends to promote certain virtues among its members. By eradicating poverty, it reduces incentives for individuals to resort to crime and nations to enrich themselves by wars of aggression.

• By maintaining a stable Constitution, especially if courts are independent and markets are free, a commercial society enhances individual freedom, which is a precondition of moral choice. Competition in markets compels individuals to exercise self-control, prudence and industriousness, virtues which, though imperfect, are attainable by ordinary people. Although these virtues promote the well-being of the individual rather than the good of others, they unintentionally benefit others. Phillipson suggests that Smith’s practical aim throughout the Theory of Moral Sentiments is “designing the decent society”.

• The Wealth of Nations, which is a follow-up to Moral Sentiments, shows how men can live and work well together. Accordingly, Smith urged governments to do two things — promulgate justice and foster institutions that improve people’s moral conduct. Basic among such institutions is the family, which lays the foundations of moral conduct by training the child to restrain its will and respect others.

• Smith’s practical proposals aimed to improve both material and moral conditions of people. Because his books have not been read as a whole, today’s social scientists and proponents of public policy have ignored or distorted his outlook. Above all, they have ignored Smith’s constant theme that unintended consequences of good intentions are often bad. The biography sums up Smith’s intellectual contribution and for this alone, the book needs to be read, and not just by economists.

See also an interesting post in the MR.

Ronald Coase on Markets, Firms and Property Rights

Not less than a 99 year old economist Ronald Coase (Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School) addressed to the conference on November 23, 2009.

(via http://antidismal.blogspot.com)