Who was Ronald Coase?
Ronald Coase was a British economist and author who won the Nobel Prize in Economics in 1991 for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy. A highly learned and distinguished scholar, he was noted for his brilliant acumen and know-how of the minutest details of the subject. For most of his life, Coase held the position of Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School. He is often regarded as the ‘father’ of reform in the policy for allocation of the electromagnetic spectrum, based on his article ‘The Federal Communications Commission’ (1959), wherein he criticised spectrum licensing, suggesting property rights as a more efficient method of allocating spectrum to users. Coase rose to fame for his 1937 article ‘The Nature of the Firm’, which introduced to the readers the concept of transaction costs to explain the nature and limits of firms. His 1960 article, ‘The Problem of Social Cost’ suggested that well-defined property rights could overcome the problems of externalities.
Childhood & Early Life
Ronald Harry Coase was born on December 29, 1910 in Willesden, a suburb of London, to Henry Joseph Coase and Rosalie Elizabeth Coase. His father was a telegraphist for the post office. Before marriage, his mother too worked at the same post.
Interestingly unlike his parents who were interested in sports—his father playing football, cricket, tennis and lawn bowls and his mother tennis—young Coase was more attracted towards academics. He loved reading.
Coase suffered from weak legs in his childhood which caused him to wear leg-irons. This physical defectiveness led Coase to attend a school specially designed for children with physical defects.
At the age of 12, Coase attained a scholarship that helped him enrol at the Kilburn Grammar School. In 1927, he passed the matriculation exam with a distinction in history and chemistry.
Though Coase wanted to pursue his higher education in either history or chemistry, the inability to do so, due to lack of knowledge in Latin and mathematics required for studying the respective subjects, led him to take up commerce.
After completing his first year of B.Comm, Coase moved to the University of London. He received a Sir Ernest Cassel Travelling Scholarship in United States which allowed him to study why the structure of American industries was organized in different ways. Through this study, he came up with a new concept of economic analysis, transaction costs and an explanation of why do firms exist.
Coase attended the London School of Economic from where he received his Bachelor of Commerce degree in 1932.
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Immediately after attaining his graduation degree from the London School of Economics, Coase took up the post of an assistant lecturer at the Dundee School of Economics and Commerce at the University of Dundee. He served in this position for two years, from 1932 to 1934.
In 1934, Coase became an assistant lecturer in commerce at the University of Liverpool. After a year of serving at the post, he moved to his alma mater, London School of Economics, where he remained as a member of the faculty until 1951. He dealt with the course on economic of public utilities in Britain.
In 1937, while working at LSE, Coase came up with his first breakthrough article, ‘The Nature of Firm’ which was primarily based on the result of his undergraduate research in United States. Through the article, he explained the fact that why do firms exist. He claimed that firms were like centrally planned economies except for the fact that they were formed because of people’s voluntary choice. Marketing cost was the primary reason for formation of firmsDuring Second World War, Coase entered government service and worked at the Forestry Commission, Central Statistical Office and Offices of War Cabinet. Post war, in 1946, Coase returned to the London School of Economics wherein he was responsible for the main economic course, ‘The Principles of Economics’. Simultaneously, he continued his research on public utilities, particularly the post office and broadcasting. In 1950, he came up with a book, ‘British Broadcasting: A Study in Monopoly’ which was the result of his studying of the American broadcasting industry while on a Rockfeller Fellowship in 1948. In 1951, Coase migrated to United States. He worked at the University of Buffalo, New York from 1951 to 1958. Subsequently, for a year, he studied at the Center for Advanced Study in Behavioural Sciences In 1959, he moved to the University of Virginia, Charlottesville where he joined the economics department. Two years later, he came up with his second most influential article, ‘The Problem of Social Cost’. Through it, he highlighted the ways in which transaction cost and property rights affected business and society. The article became an instant hit and became the most widely cited article in modern economic literature. The article, ‘The Problem of Social Cost’ led to the eventual development of the Coase theorem, which rested on the foundation that when information and transaction costs are low, the market will produce an efficient solution to the problem of nuisances without regard to where the law places the liability for the nuisance. In 1964, he settled at the University of Chicago where he served as the Clifton R. Musser Professor Emeritus of Economics until 1981. Additionally, he became the editor of the Journal of Law and Economics. He continued to serve this post until 1982. During his tenure as an editor, he temporarily capped the role of a trustee of the Philadelphia Society. In 2012, at the age of more than 100, he came out with a book, ‘How China Became Capitalist’.
Coase most distinguished contribution in the field of economics came with his articles published in 1937, 1959 and 1960. In his first article, ‘The Nature of Firm’, he introduced the concept of transaction cost to explain the nature and limits of firms. Through his 1959 work, ‘The Federal Communication Commission’, he suggested property rights as the most efficient method of allocating spectrum to users. Through his 1960 work, ‘The Problem of Social Cost’ he suggested that well-defined property rights could overcome the problems of externalities
Awards & Achievements
Ronald Coase won the 1991 Nobel Prize in Economics for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.
In 2012, he was honoured with an honorary doctorate degree from the University of Buffalo.
Personal Life & Legacy
Ronald Coase tied the nuptial knot with Marion Ruth Hartung of Chicago, Illinois on August 7, 1937 in Willesden, England.
He breathed his last on September 2, 2013, in Chicago, at the age of 102.