Neither Misunderstood Nor Ignored: The Early Reception of Coase's Wider Challenge to the Analysis of Externalities

History of Economic Ideas, 24, 2014

35 Pages Posted: 14 Aug 2014

See all articles by Steven G. Medema

Steven G. Medema

Duke University - Department of Economics

Date Written: April 22, 2014

Abstract

The ‘Coase theorem’ has long been the idea most commonly associated with Ronald Coase’s analysis in The Problem of Social Cost. Yet, Coase frequently argued late in his career that he has been misunderstood, and that the central message(s) of the article lay elsewhere. Though virtually all of the discussion in decades following the publication of The Problem of Social Cost focused on Coase’s negotiation result, the fact is that Coase’s message was not, at the start, misunderstood. This paper takes up a number of the treatments of The Problem of Social Cost in the years immediately following its publication to demonstrate that Coase’s emphasis on the reciprocal nature of externalities, the importance of transaction costs, the possibility of merger solutions, the costs associated with state action, and the need for a comparative institutional approach were anything but lost on these early commentators. It was only later that the negotiation result became the major fixation of interpreters of Coase’s work.

Keywords: Coase theorem, externalities, social cost

JEL Classification: B20, B21, B31, D62, D70, H00, K00

Suggested Citation

Medema, Steven G., Neither Misunderstood Nor Ignored: The Early Reception of Coase's Wider Challenge to the Analysis of Externalities (April 22, 2014). History of Economic Ideas, 24, 2014, Available at SSRN: https://ssrn.com/abstract=2479729

Steven G. Medema (Contact Author)

Duke University - Department of Economics ( email )

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Durham, NC 27708-0204
United States

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