[Note for bibliographic reference: Melberg, Hans O. (1997), Profit maximizing
publishing - A review of Essays on Economics and Economists by R. H. Coase, http://www.oocities.org/hmelberg/papers/970327.htm]
Profit maximizing publishing
A review of Essays on Economics and Economists by R. H.
Coase
by Hans O. Melberg
R. H. Coase, Essays on Economics and Economists, London: The University of
Chicago Press, 1994 (paperback 1995), ISBN: 0-226-11103-2, 222 pages
Introduction
R. H. Coase is rightly famous for his work. However, the present book Essays on
Economics and Economists is not to be recommended. In short, there is very little here
that is both new and interesting. There is close to nothing new in the book because all
the essays, except one (his Nobel Prize Memorial Lecture), have been published previously.
Moreover, there is little interesting here since many of the questions discussed - like
whether A. Marshall lied about his place of birth - are simply details of limited general
interest. One is then left to speculate on why Coase agreed to publish this book. One
reason, he writes, is "vanity." Another reason, I would suggest, is
profit-maximizing behaviour.
The content
The book is divided into two sections. The first is about economics as a subject, dealing
some of Coase's favourite themes such as the industrial structure of action, social cost,
the relationship between economics and the other disciplines and the relative merits of
planning vs. the free market. In this section we also find Coase's well known and
controversial article The Market for Goods and the Market for Ideas.
The second section is a collection of eight essays about various economists. It
includes short essays on Alfred Marshall (in fact, three and a half on Marshall), Pigou
(half a chapter), Arnold Plant. Duncan Black, George J. Stigler and, lastly, an essay
about economists at LSE in the 1930s.
The arguments
Although the first section is well done, the interested reader is better served by reading
some of Coase's more famous papers The Nature of the Firm and The Problem of
Social Cost. In the first, he uses the concept of transaction costs to explain the
existence and size of firms. This work is highly significant since it sheds light on the
debate between the adherents of planning vs. the free-market advocates. Planning is
conducted within firms. The more profitable planning is (the larger transaction costs
are), the larger the firms will be in a free-market economy - since the engine of
competition will then eliminate smaller firms. Thus, Coase shows how the market itself
finds the right balance between planning and free-market transactions (see especially p.
6).
In the second famous paper, The Problem of Social Cost (not in the book), Coase
explains what Stigler later has called the Coase theorem. This theorem shows that under
the assumptions of zero transaction costs and a complete assignment of property rights,
the problem of externalities should be solved by private bargaining between the
participants. This, according to Coase, undermines the Pigouvian approach which calls for
government intervention in the form of taxes and subsidies to remedy the problem of
externalities. Moreover, if we return to the real world in which transactions costs are
often positive, Coase thinks that his article shows that "It is obviously desirable
that rights should be assigned to those who can use them most productively and with
incentives that lead them to do so" (p. 11). The article also demonstrates, according
to Coase, that the legal system "will have a profound effect on the working of the
economic system and may in certain respects be said to control it." (p.11)
Both of Coase's papers are important reading although one may disagree somewhat with
the free-market conclusions he often draws. For example, there are obvious coordination
problems which makes it difficult for private agents to make agreements to solve the
problem of externalities. The solution to assign property rights to avoid these problems,
is not "obviously" right since it also implies a distribution of income which
need not be "desirable." There are also other problems, but they do not distract
from Coase's important contribution in directing research to these previously unexplored
issues.
The point, however, is that in both these instances you are better off reading the
original articles than to read the first chapter in this book. The rest of the book
suffers from much of the same problem. It is good reading, but the content is well known
and the papers have all been published before. It is useful to be reminded of the
importance of staying close to the empirical world, unlike Friedman who believes accuracy
of predictions are more important than accuracy of assumptions (see How Should
Economists Choose). In Economics and Contiguous Disciplines, Coase argues that
a discipline is best characterized by its subject matter, not its methodological approach.
Moreover, the growth or decay of a discipline - and the border between disciplines - is
determined by competition. It is competition which reveals which discipline is best at
answering the central questions of the subject. To be concrete, Coase predicts that the
invasion of economists into political science is temporary since it is due to the
methodology of economists. Political science as a discipline will not disappear and
political scientist will learn the methodology of economists - specifically the focus on
rationality and its consequences (read: game theory).
In the fourth, sixth and seventh chapter (Economists and Public Policy, The
Wealth of Nations and Adam Smith's View of Man) we return to one of Coase's
favourite themes: the advantages of the free market and the ills of government
intervention. For example, Coase points to various government regulation - specifically,
the regulation of the Gas market by the Federal Power Commission during the 1960s and the
American drug regulation law of 1962 (see especially p. 59) - and how the regulation often
serves those regulated, not the consumers. Once again, Coase's reminder is useful -
although a bit one sided and old. This bias is somewhat reversed in the provocative
article The Market for Goods and the Market for Ideas in which Coase makes fun of
intellectuals' self-serving and inconsistent insistence on full freedom in the sphere of
intellectual goods (ideas), combined with the determination of intellectuals to regulate
the market for goods using the conclusions of their freely expressed ideas. However, once
again the content of this article is well-known.
Coase on other economists
I was a bit disappointed by Coase's essays on other economists. He seems to focus mainly
on the personal life of the economists, as opposed to explaining their ideas. There is
nothing intrinsically wrong with that, but at least this reviewer is more interested in
the economic ideas of an economists than his personal history. For example, while Coase's
eloquence prevented me from the heights of boredom, I failed to be fascinated by his essay
on why Pigou was appointed as Marshall's successor (instead of H. S. Foxwell) or the
discussion of where Marshall was born, the nature of his father's work and other personal
details relating to the various economists he portrays.
I do not mean that the essays are without merit. There are people who are interested in
these issues, and no biography is complete without personal details. However, since the
essays have been published previously, those who are interested in short biographical
sketches already have access to the articles. Therefore, to reprint the essays, I suspect,
has a low marginal utility.
Overall
Coase is an economist I admire. His articles are always well written - almost to the point
of being entertaining. Yet, I cannot but wonder why he published this book. Musicians
often launch "The Best of ..." albums - and this I understand. However, this is
certainly not "The Best of Coase." If it were, I would have found it useful.
Having a collection of his best articles in one book reduces the tediousness of finding
the articles in various journals. However, this book consists mostly of essays with topics
that I either find uninteresting - or of arguments that are too well-known to be worth
rereading (Maybe Coase is the victim of his own success and fame?). Others may differ in
their taste and previous knowledge, and for those this book may be useful. To me it simply
failed to give the high intellectual return I expect from a book by Coase. And, yes, I
know - the book was most probably profitable, both for Coase and the publisher, the
University of Chicago Press. Maybe this is the answer to why the book was published: It
was profitable to do so. Particularly, now when they could write "Winner of the Nobel
Prize in Economics" with large letters on the front cover.
[Note for bibliographic reference: Melberg, Hans O. (1997), Profit maximizing
publishing - A review of Essays on Economics and Economists by R. H. Coase, http://www.oocities.org/hmelberg/papers/970327.htm]