Ronald H. Coase Quotes (19 quotes) | Quotes of famous people

Works

The Nature of the Firm

Ronald H. Coase

Ronald H. Coase: 19 quotes 21 likes

Famous Ronald H. Coase Quotes

“A firm consist of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur.”

Ronald H. Coase

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 393

“Economists have uncovered the conditions necessary if Adam Smith’s results are to be achieved and where, in the real world, such conditions do not appear to be found, they have proposed changes which are designed to bring them about. It is what one finds in the textbooks. Harold Demsetz has said rightly that what this theory analyses is a system of extreme decentralisation. It has been a great intellectual achievement and it throws light on many aspects of the economic system. But it has not been by any means all gain.”

Ronald H. Coase

1990s and later, "The Institutional Structure of Production" (1992)

“If you torture the data enough, nature will always confess.”

Ronald H. Coase

Coase states that he said this in a talk at the University of Virginia in the early 1960s and that this saying, "in a somewhat altered form, has taken its place in the statistical literature."
Alternative: "If you torture the data long enough, it will confess."
Cited in: Gordon Tullock, "A Comment on Daniel Klein's 'A Plea to Economists Who Favor Liberty'", Eastern Economic Journal, Spring 2001.
1960s-1980s, "How should economists choose?" (1981)
Source: Essays on Economics and Economists

“Transaction costs were used in the one case to show that if they are not included in the analysis, the firm has no purpose, while in the other I showed, as I thought, that if transaction costs were not introduced into the analysis, for the range of problems considered, the law had no purpose.”

Ronald H. Coase The Nature of the Firm

Ronald H. Coase (1988). "The Nature of the Firm: Influence." Journal of Law, Economics, and Organization 4 (No. 1, Spring): 33—47. p. 34; as cited in Eggertsson (1990; xiii)
1960s-1980s

“In mainstream economic theory, the firm and the market are, for the most part, assumed to exist and are not themselves the subject of investigation. One result has been that the crucial role of the law in determining the activities carried out by the firm and in the market has been largely ignored.”

Ronald H. Coase

1960s-1980s, "The Firm, the Market, and the Law" (1988)

“But a theory is not like an airline or bus timetable. We are not interested simply in the accuracy of its predictions. A theory also serves as a base for thinking. It helps us to understand what is going on by enabling us to organize our thoughts. Faced with a choice between a theory which predicts well but gives us little insight into how the system works and one which gives us this insight but predicts badly, I would choose the latter, and I am inclined to think that most economists would do the same.”

Ronald H. Coase

1960s-1980s, "How should economists choose?" (1981)

Ronald H. Coase Quotes

“American institutionalists were not theoretical but anti-theoretical…. Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire.”

Ronald H. Coase

Ronald H. Coase (1984). "The New Institutional Economics." Journal of Institutional and Theoretical Economics 140 (March): 299-231; p. 230; As cited in: Malcolm Rutherford (1996), Institutions in Economics: The Old and the New Institutionalism. p. 9
1960s-1980s

Waiting

“The question always is, will it pay to bring an extra exchange transaction under the organizing authority? At the margin, the costs of organizing within the firm will be equal either to the costs of organizing in another firm or to the costs involved in leaving the transaction to be “organised” by the price mechanism. Business men will be constantly experimenting, controlling more or less, and in this way equilibrium will be maintained. This gives the position of equilibrium for static analysis.”

Ronald H. Coase

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 404

Men , Way , Question , Business

“Markets are institutions that exist to facilitate exchange, that is, they exist in order to reduce the cost of carrying out exchange transactions. In an economic theory which assumes that transaction costs are nonexistent. markets have no function to perform, and it seems perfectly reasonable to develop the theory of exchange by an elaborate analysis of individuals exchanging nuts for apples on the edge of the forest or some similar fanciful example. This analysis certainly shows why there is a gain from trade, but it fails to deal with the factors which determine how much trade there is or what goods are traded.”

Ronald H. Coase

1960s-1980s, "The Firm, the Market, and the Law" (1988)

“In my view, what is wanted in industrial organization is a direct approach to the problem. This would concentrate on what activities firms undertake, and would endeavor to discover the characteristics of the groupings of activities within firms. Which activities tend to be associated and which do not? The answer may well differ for different kinds of firm.”

Ronald H. Coase

1960s-1980s, "Industrial Organization: A Proposal for Research" (1972)

Problem

“Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market. Within a firm, these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-coordinator, who directs production. It is clear that these are alternative methods of coordinating production. Yet, having regard to the fact that, if production is regulated by price movements, production could be carried on without any organization at all might we ask, why is there any organization?”

Ronald H. Coase

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 388

“What is studied is a system which lives in the minds of economists but not on earth. I have called the result “blackboard economics.” The firm and the market appear by name but they lack any substance. The firm in mainstream economic theory has often been described as a “black box.””

Ronald H. Coase

And so it is.
1990s and later, "The Institutional Structure of Production" (1992)

Study , Appearance , Box

“If economists wished to study the horse, they wouldn't go and look at horses. They'd sit in their studies and say to themselves, "what would I do if I were a horse?"”

Ronald H. Coase

Ronald Coase in speech to the "International Society of New Institutional Economics" the 17 September 1999, Washington DC. He claims he was quoting fellow economist Ely Devons which reportedly said this in a meeting
1990s and later

Study , Horse

“I can't remember [of a good regulation]. Regulation of transport, regulation of agriculture—agriculture is a, zoning is z. You know, you go from a to z, they are all bad. There were so many studies, and the result was quite universal: The effects were bad.”

Ronald H. Coase

Ronald Coase: in Reason, january 1997 ( read online http://www.reason.com/news/show/30115.html): About state regulation.
1990s and later

Study , Universe

“The traditional approach has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?”

Ronald H. Coase

1960s-1980s, "The Problem of Social Cost" (1960)

Question , Nature , Problem

“Why… are there any market transactions at all? Why not all production carried on by one big firm?… First, as a firm gets larger, there may be decreasing returns to the entrepreneur function, that is, the costs of organizing additional transactions within the firm may rise… Second, it may be that as the transactions which are organized increase, the entrepreneur fails to place the factors of production in the uses where their value is greatest, that is, fails to make the best use of the factors of production… Finally, the supply price of one or more of the factors of production may rise, because the "other advantages" of a small firm are greater than those of a large firm.”

Ronald H. Coase

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 394-5