Tuesday, September 3, 2013

Coase and the Austrians

By Peter Klein

Ronald Coase passed away yesterday at the age of 102.  Coase is one of the most influential economists of the twentieth century, perhaps of all time. Here is an official notice from the University of Chicago law school; here are comments from Lynne Kiesling, Mike SykutaPete  Boettke, Josh Gans, and me.  Much will be written in the coming days on Coase and his contributions, so let me just highlight a few points about his relationship with the Austrian school.
Coase was no Austrian, but was friendly with many Austrian economists, was deeply critical of modern positivism and instrumentalism, and was skeptical of most regulations. Austrians have generally rejected Coase’s approach to property rights, externalities, and liability (see Block, 1977Rothbard 1982, and Cordato, 1992, for examples of a large literature). However, Coase’s insight that legal entitlements are often traded, and that trading partners can often “contract around” legal and regulatory barriers, is important and useful, even if contemporary law-and-economics scholarship has drawn the mistaken implication that judges can somehow use this insight to determine the “optimal” allocation of property rights.

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