What Happened on Blackstone Avenue? Exorcising Coase Theorem Mythology

Center for the History of Political Economy at Duke University Working Paper Series

41 Pages Posted: 16 Jul 2021

See all articles by Steven G. Medema

Steven G. Medema

Duke University - Department of Economics

Date Written: July 14, 2021

Abstract

The present paper revisits the path by which Coase came to set down the result now generally known as the Coase theorem in his 1960 article. I draw on both the published record and archival resources in an effort to clear away some of the mist and, as it will emerge, dispel some of the mythology. As good as the traditional story is—thanks in no small part to Stigler’s hyperbole—the reality is far more interesting, both for what it tells us about Coase’s result and for our understanding of the messy process behind how it came to be. For as we shall see, Coase set out at least three versions of his result, two of them assuredly incorrect, in 1959–60 and had at best a faint sense for the implications of transaction costs for his conclusion—something which he was only put on to by others to whom he showed the original draft of his 1959 article. And as for that fateful evening during which he "converted" the Chicagoans to his point of view, we shall see both that the extent of the conversion necessary was far less than the traditional story suggests and that it is not at all clear what it was that the Chicagoans believed at the end of the evening, Coase’s 1960 argument notwithstanding.

Keywords: Ronald Coase, transaction costs, Coase theorem, externalities

JEL Classification: B21, B31, H23, K00, L1, Q50

Suggested Citation

Medema, Steven G., What Happened on Blackstone Avenue? Exorcising Coase Theorem Mythology (July 14, 2021). Center for the History of Political Economy at Duke University Working Paper Series, Available at SSRN: https://ssrn.com/abstract=3886896 or http://dx.doi.org/10.2139/ssrn.3886896

Steven G. Medema (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
165
Abstract Views
703
Rank
270,992
PlumX Metrics