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    {\bf Review of  {\it Coasean Economics: Law and Economics and the New 
Institutional Economics} edited by  Steven Medema       }\\
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                    July 3, 1998 \\
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                    Eric Rasmusen \\
                   
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          \noindent 
\hspace*{20pt}	Professor of Business Econonomics and Publicy Policy and 
Subheadar Faculty Fellow,   Indiana University,
Kelley School of Business, BU 456,   
  1309 E 10th Street,
  Bloomington, Indiana, 47405-1701.
  Office: (812) 855-9219.   Fax: 812-855-3354. Email: Erasmuse@indiana.edu; 
Erasmuse@Juno.com; Erasmusen@Yahoo.com (for attachments).   Web:  
Php.indiana.edu/$\sim$erasmuse.  Copies of this paper can be found at 
       Www.bus.indiana.edu/$\sim$erasmuse/@Articles/Unpublished/coase.pdf. 
      

           
   
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    Poor Professor Coase.  What ironies he has inspired!    He is 
known almost exclusively for three   papers,  ``The Nature
of the Firm''  ({\it Economica}, 1937),  ``The Problem of
Social Cost''        {\it Journal of Law \& Economics},    1960),
and   ``Durability and Monopoly''  ( {\it Journal of Law and
Economics}, 1972).   Each of these is theoretical, albeit
verbal theory, with almost no empirical content.   Yet for
many years Coase has called for an increase in the amount
of  intelligent  descriptive empirical  work in
economics, and has shown how to do it with his own careful 
case studies.  These case studies are little cited, but
they are even less imitated.
  

  A large amount of the work inspired by Coase,  including the  conference 
volume here reviewed, consists of purely theoretical work arguing over nuances 
of   theory.  It is odd to read the  repeated references  in the volume's   
essays to Coase's belief  in the importance of empirical work, and then to 
reflect on the substance of the essays.  There is    only one empirical piece, 
and almost no discussion of individual Coase case studies, as opposed to  
discussion  of the   usefulness, indeed, the necessity, of studying 
institutions.    Moreover, since it  lacks a bibliography of Coase's works, the 
reader of this volume will be left no wiser about the existence of  the 
empirical  part of Coase's work.  

  Individual  essays  often cover more than one aspect of Coase's influence, but 
in the simplest classification, three essays  are on the nature of the firm (by 
Langlois, Hodgson, and Masten),  four are on the Coase Theorem (by Zelder, 
Goldberg, McCloskey, and  Allen), and six are on methodology (Boettke,  Duxbury,  
Maki,    Samuels and Medema,  Williamson,  and  Zerbe and Medema). Absent from 
discussion is the influential  "Coase Conjecture" of Coase's 1972 paper,   which 
has given rise to a   literature, but   a literature that is mostly 
mathematical. Thus, the "Coasean economics" of this book is really the economics 
of Coase Theorem and of  the determinants of  firm size. 

   
    Those two  papers  are  indeed  Coase's  best, but they are good theory 
because Coase    cared about facts  and pondered them.    Because he pondered 
facts more than he pondered other theories,    he looked at things in a new 
light. That is  the secret of   his famous  papers, and   is what ties together 
many of the Chicago Nobel laureates, including, certainly,  Stigler, Coase, 
Becker, and Fogel.  Coase  thereby   avoided the still-useful  criticism  
Macaulay made of James Mill's   economistical theory of government, that "We 
have here an elaborate treatise on Government, from which, but for two or three 
passing allusions,    it would not appear that the author was aware that any 
governments actually existed among men.'' ("Mill on Government," {\it Edinburgh 
Review},  1829). Even where Coase did not describe  institutions, he was clearly 
aware of them.  

     The  single  empirical   essay in this  collection   is an excellent  
discussion  by Victor Goldberg of two puzzles in the common law. One is why the   
law  imposed some liability on railroads for spark damage to adjacent fields, 
and railroads contracted out of this liability in land they leased out, yet 
railroads did not buy damage waivers from other adjacent farmers.  The other is 
why contracting  practice in the petroleum shipping industry is to make the 
quantity certification of an independent surveyor binding (even if later shown 
to be wrong), and courts accept this, but courts do not accept clauses in which 
the surveyors try to limit their own liability.  This is a good example of 
looking to the real world for inspiration. 

  The other essays contain much discussion of how one might best define "firm" 
and "transaction cost,"   and whether the Coase Theorem points out  that (a)  in 
the absence of transaction costs efficient allocations result or (b) in the 
presence of transaction costs efficient allocations might not result.  Such 
discussions are most interesting when presented as polemics, which is why 
Professor McCloskey's essay on Stigler and Samuelson versus McCloskey and Coase 
vies with Goldberg's  essay on sparks and shipping  as  the most  interesting in 
the collection.   For the rest, there is much to interest those who enjoy the 
hermeneutics of intellectual history, but less to interest those who  worry less 
about  how things are phrased. 





 

   
  REVIEWER: Eric Rasmusen, Indiana University School of Business

 Limit: 900 words. 

693  words right now in the text. 

 Kluwer Academic Publishers, 1998. 



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