Ronald Harry Coase
Born	December 19, 1910 (1910-12-19) (age 96) Willesden, England
Occupation	Professor of Economics

Ronald Harry Coase (b. December 29, 1910) is a British economist and the Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School. After studying with the University of London External Programme in 1927-29, Coase entered the London School of Economics where he took courses with Arnold Plant. Coase graduated from the London School of Economics with a B.Sc. (Econ) in 1931, and earned his doctorate from the University of London in 1951. He emigrated to the United States that same year and started work at the University of Buffalo. In 1958 he moved to the University of Virginia. Coase settled at the University of Chicago in 1964 and became the editor of the Journal of Law and Economics. He received the Nobel Prize in Economics in 1991. is the 353rd day of the year (354th in leap years) in the Gregorian calendar. ... Year 1910 (MCMX) was a common year starting on Saturday (link will display calendar) of the Gregorian calendar (or a common year starting on Friday [1] of the 13-day-slower Julian calendar). ... Image File history File links Flag_of_England. ... Willesden is an area in North West London which forms part of the London Borough of Brent. ... Motto (French) God and my right Anthem No official anthem - the United Kingdom anthem God Save the Queen is commonly used England() – on the European continent() – in the United Kingdom() Capital (and largest city) London (de facto) Official languages English (de facto)1 Unified  -  by Athelstan 927 AD  Area  -  Total... This article needs additional references or sources for verification. ... is the 363rd day of the year (364th in leap years) in the Gregorian calendar. ... Year 1910 (MCMX) was a common year starting on Saturday (link will display calendar) of the Gregorian calendar (or a common year starting on Friday [1] of the 13-day-slower Julian calendar). ... Alan Greenspan, former chairman, United States Federal Reserve. ... The University of Chicago Law School, having recently celebrated its centennial in the 2002-2003 school year, has established itself as a high profile part of the University of Chicago. ... The University of London External Programme is an external degree granting portion of the University of London, and has existed since 1858. ... The London School of Economics and Political Science (LSE) is a specialist constituent college of the University of London. ... The London School of Economics and Political Science (LSE) is a specialist constituent college of the University of London. ... A Bachelor of Science (B.S., B.Sc. ... Year 1931 (MCMXXXI) was a common year starting on Thursday (link will display full 1931 calendar) of the Gregorian calendar. ... The University of London is a university based primarily in London. ... Year 1951 (MCMLI) was a common year starting on Monday (link will display the full calendar) of the Gregorian calendar. ... University at Buffalo The University at Buffalo, formerly known as the State University of New York at Buffalo, is located in Buffalo, New York, USA, and is one of the four university centers operated by the State University of New York. ... Year 1958 (MCMLVIII) was a common year starting on Wednesday (link will display full calendar) of the Gregorian calendar. ... The University of Virginia (also called U.Va. ... The University of Chicago is a private university located principally in the Hyde Park neighborhood of Chicago. ... 1964 (MCMLXIV) was a leap year starting on Wednesday (the link is to a full 1964 calendar). ... The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel[1] (Swedish: Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), commonly called the Nobel Prize in Economics, or more acurately the Nobel Memorial Prize in Economic Sciences, is a prize awarded each year for outstanding intellectual... Year 1991 (MCMXCI) was a common year starting on Tuesday (link will display the 1991 Gregorian calendar). ...

Born in Willesden, England, Coase is best known for two articles in particular: "The Nature of the Firm" (1937), which introduces the concept of transaction costs to explain the size of firms, and "The Problem of Social Cost" (1960), which suggests that well-defined property rights could overcome the problems of externalities (see Coase Theorem). Willesden is an area in North West London which forms part of the London Borough of Brent. ... Motto (French) God and my right Anthem No official anthem - the United Kingdom anthem God Save the Queen is commonly used England() – on the European continent() – in the United Kingdom() Capital (and largest city) London (de facto) Official languages English (de facto)1 Unified  -  by Athelstan 927 AD  Area  -  Total... In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. ... Corporate redirects here. ... This article or section does not cite any references or sources. ... An externality occurs in economics when a decision (for example, to pollute the atmosphere) causes costs or benefits to individuals or groups other than the person making the decision. ... This article or section is in need of attention from an expert on the subject. ...

Coase's transaction costs approach is currently influential in modern organizational theory, where it was reintroduced by Oliver E. Williamson. Oliver E. Williamson (born September 27, 1932) is a prominent author in the area of transaction cost economics, a student of Ronald Coase and Herbert Simon. ...

Coase is also often referred to as the "father" of reform in the policy for allocation of the electromagnetic spectrum, based on his article "The Federal Communications Commission" (1959) where he criticizes spectrum licensing, suggesting property rights as a more efficient method of allocating spectrum to users. The United States government requires users of radio spectrum to obtain a broadcast license to use the airwaves, except for low-powered transmitters like CBs and Walkie Talkies. ...

Another important contribution of Coase is the "Coase Conjecture": an informal argument that durable-goods monopolists do not have market power because they are unable to commit to not lowering their prices in future periods.

Coase also coined the well known, but often misquoted adage "If you torture the data long enough, it will confess."

The Nature of the Firm

The Nature of the Firm was a brief but highly influential essay in which Coase tries to explain why the economy is populated by a number of business firms, instead of consisting exclusively of a multitude of independent, self-employed people who contract with one another. Given that "production could be carried on without any organization [that is, firms] at all", Coase asks, why and under what conditions should we expect firms to emerge? Corporate redirects here. ... A self-employed person works for himself/herself instead of as an employee of another person or organization, drawing income from a trade or business. ... A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. ...

Since modern firms can only emerge when an entrepreneur of some sort begins to hire people, Coase's analysis proceeds by considering the conditions under which it makes sense for an entrepreneur to seek hired help instead of contracting out for some particular task. For the sequel to the computer game Entrepreneur, which has no article of it own, see The Corporate Machine. ...

The traditional economic theory of the time suggested that, because the market is "efficient" (that is, those who are best at providing each good or service most cheaply are already doing so), it should always be cheaper to contract out than to hire.

Coase noted, however, that there are a number of transaction costs to using the market; the cost of obtaining a good or service via the market is actually more than just the price of the good. Other costs, including search and information costs, bargaining costs, keeping trade secrets, and policing and enforcement costs, can all potentially add to the cost of procuring something with a firm. This suggests that firms will arise when they can arrange to produce what they need internally and somehow avoid these costs. In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. ... A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information used by a business to obtain an advantage over competitors within the same industry or profession. ...

There is a natural limit to what can be produced internally, however. Coase notices a "decreasing returns to the entrepreneur function", including increasing overhead costs and increasing propensity for an overwhelmed manager to make mistakes in resource allocation. This is a countervailing cost to the use of the firm.

Coase argues that the size of a firm (as measured by how many contractual relations are "internal" to the firm and how many "external") is a result of finding an optimal balance between the competing tendencies of the costs outlined above. In general, making the firm larger will initially be advantageous, but the decreasing returns indicated above will eventually kick in, preventing the firm from growing indefinitely.

Other things being equal, therefore, a firm will tend to be larger:

• the less the costs of organizing and the slower these costs rise with an increase in the transactions organized.
• the less likely the entrepreneur is to make mistakes and the smaller the increase in mistakes with an increase in the transactions organized.
• the greater the lowering (or the less the rise) in the supply price of factors of production to firms of larger size.

The first two costs will increase with the spacial distribution of the transactions organized and the dissimilarity of the transactions. This explains why firms tend to either be in different geographic locations or to perform different functions. Additionally, technology changes that mitigate the cost of organizing transactions across space will cause firms to be larger--the advent of the telephone and cheap air travel, for example, would be expected to increase the size of firms.

Coase does not consider non-contractual relationships, as between friends or family.

"The Problem of Social Cost"

Published in the Journal of Law and Economics in 1960, while Coase was a member of the Economics department at the University of Virginia, "The Problem of Social Cost" provided the key insight that it is unclear where the blame for externalities lies. The example he gave was of a rancher whose cattle stray onto the cropland of his neighbour. If the rancher is made to restrict his cattle, he is harmed just as the farmer is if the cattle remain unrestrained. The University of Virginia (also called U.Va. ...

Coase argued that without transaction costs it is economically irrelevant who is assigned initial property rights; the rancher and farmer will work out an agreement about whether to restrict the cattle or not based on the economic efficiency of doing so. Property rights allocation will hence matter only in determining distribution. In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. ...

With sufficient transactions costs however, initial property rights will have a non-trivial effect. From the point of view of economic efficiency, property rights should be assigned such that the owner of the rights wants to take the economically efficient action. To elaborate, if it is efficient not to restrict the cattle, the rancher should be given the rights (so that cattle can move about freely), whereas if it is inefficient to do so, the farmer should be given the rights over the movement of the cattle (so the cattle are restricted).

This seminal argument forms the basis of the famous Coase Theorem as labeled by George Stigler. This article or section is in need of attention from an expert on the subject. ...

The Ronald Coase Institute

Coase is research advisor to the Ronald Coase Institute, an organization that seeks to build the study of markets, with particular support for researchers from underdeveloped countries.

Further reading

• Coase, Ronald. "The Nature of the Firm". on-line version.
• Coase, Ronald. "The Nature of the Firm" in Economica, Vol. 4, No. 16, November 1937 pp. 386-405
• Coase, Ronald. "The Nature of the Firm" in Readings in Price Theory, Stigler and Boulding, editors. Chicago, R. D. Irwin, 1952.
• Coase, Ronald. "The Problem of Social Cost" in Journal of Law and Economics, v. 3, n°1 pp. 1-44, 1960 on-line version.
• Coase, Ronald. "Durability and Monopoly" in Journal of Law and Economics, vol. 15(1), pp. 143-49, 1972.
• Coase, Ronald. "The Institutional Structure of Production", The American Economic Review, vol.82, n°4, pp. 713-719, 1992. (Nobel Prize lecture) on-line version

See also

• Theory of the firm
• Coase theorem
• Merger
• Horizontal integration
• Vertical integration
• Partnership
• Oliver E. Williamson
• List of economists
• University of Virginia
• List of think tanks
• Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

The theory of the firm consists of a number of economic theories which describe the nature of the firm (company or corporation), including its behaviour and its relationship with the market. ... This article or section is in need of attention from an expert on the subject. ... The phrase mergers and acquisitions or M&A refers to the aspect of corporate finance strategy and management dealing with the merging and acquiring of different companies as well as assets. ... This article or section does not cite its references or sources. ... It has been suggested that Vertical expansion be merged into this article or section. ... A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested. ... Oliver E. Williamson (born September 27, 1932) is a prominent author in the area of transaction cost economics, a student of Ronald Coase and Herbert Simon. ... This is an alphabetical list of notable economists. ... The University of Virginia (also called U.Va. ... This article is a list of think tanks by country. ... The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (in Swedish Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is a prize awarded each year for outstanding intellectual contributions in the field of economics. ...

External links

• Biography at the Nobel site
• Biography at EconLib
• Wireless Communications and Computing at a Crossroads, Journal on Telecommunications & High Technology Law, Vol. 3, No. 2, p. 239, 205 (describing some of Ronald Coase's theories as they apply to wireless communications and providing several footnotes for further research).
• Coase Institute
• "Looking for Results", interview in Reason by Thomas W. Hazlett