Thursday, September 5, 2013
The Misuse Of Ronald Coase
In a recent post I provided link to a video that featured Ronald Coase. I did so because it provided an insight into his character. He was a humble person who had a very practical and circumscribed view of his ideas. This article describes some the ways in which Coase's work was exploited by ideologists at the University of Chicago. One of his ideas was christened with the title of the Coase Theorem. This put a scientific gloss on a very simple idea that only applied to a small set of disputes over property rights. His simple idea, which is still in introductory textbooks, and often without the caveats that Coase used to qualify his idea, has been exploited to limit the role of government in dealing with the social cost of externalities. Moreover, Chicago's law school incorporated Coase's simple idea into its teaching of property rights. An entire generation of lawyers have been influenced by the misuse of Coase's ideas. Moreover, a large number of legal precedents have been established which make it more difficult for large groups of individuals to use class action suits to seek damages against corporations. This article by John Cassidy does a good job of describing the misuse of Ronald Coase. The misuse, however, goes beyond economics. Our legal system has also been infected by the economic ideology of economists at Chicago.