Ronald Coase, Firms and Markets

21 Pages Posted: 19 Sep 2014 Last revised: 21 Nov 2014

Date Written: September 11, 2014


This paper will attempt to explain how Coase, from his earliest important paper, “The Nature of the Firm,” transformed his interest from firm organization, determined by transaction costs, to the influence of firm choices and individual choices — collectively, the market — on the allocation of resources, including on the efforts of governmental organizations to allocate resources. Over time, less interested in firm organization, Coase directed his work to showing how the market would invariably dominate the government with respect to the allocation of resources, limited by transaction costs. The paper will attempt to show, however, in contrast to widespread views, that there is little link between Coase’s focus on transaction costs in “The Nature of the Firm” and his subsequent attention to those costs in “The Problem of Social Cost.” The paper will include anecdotal support: I was a student of Mr. Coase for many years.

Suggested Citation

Priest, George L., Ronald Coase, Firms and Markets (September 11, 2014). Yale Law & Economics Research Paper No. 510. Available at SSRN:

George L. Priest (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

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