18th December 2018
Ronald Coase never liked the Coase Theorem – which was created by George Stigler
This video. I’ve prepared a transcript below.
00:17: Economics has a become theory driven subject and I believe the approach should be empirical. You study the system as it is, understand why it works the way it does and consider what changes could be made and what effects they would have.
ON THE COASE THEOREM
00:52: It is not about my work at all. George Stigler, who is a very nice man, wanted to pay me a compliment, so he invented this but he named it Coase theorem and not the Stigler Theorem. The reason I don’t like it is that it’s a proposition about a system in which transaction costs are zero. Well that isn’t the way the system actually is. Therefore it was a theoretical proposition and I don’t like it.
REGARDING THE FCC Argument
1:40 It was decided I think by Aaron Director and George Stigler that they should have this meeting at his place. All I said was that the Federal Communications Commission should award the right to transmit on a given frequency to the person who paid the highest amount for it and to my astonishment this view â€“ which one would have thought would be welcomed in Chicago â€“ was rejected by them.
We went on I think for how long – an hour or something like that â€“ and at the end of that time they of course realised that I was right. They were very impressed by the fact and changed their views, but I wasn’t particularly impressed because all I was doing is stating the obvious.
ARGUING THE OBVIOUS
I’ve never done anything it wasn’t obvious. I never thought the things that I did were so extraordinary. The problem is why other people didn’t do it.