EconTalk Ronald Coase on Externalities, the Firm, and the State of Economics
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May 21, 2012 
Nobel Laureate Ronald Coase shares insights on his career in economics, his influential papers on firms and social costs, interactions with Keynes and Hayek, and perspectives on the Chinese economy. Discussions include the nature of firms, decision-making processes, trial and error, public choice theory, and China's transformation to a capitalist economy. The episode closes with optimism for the future and appreciation for the guest.
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Against Blackboard Economics
- Blackboard economics studies imagined systems you can put on a blackboard rather than how the world actually operates.
- Coase urges empirical study of real institutions and behavior instead of relying on abstract models and aggregate statistics.
The Dinner That Changed Minds
- At Aaron Director's dinner early critics thought Coase was wrong until they understood his simple point about transaction costs and entitlements.
- The evening converted sceptics, but spawned the misnamed 'Coase Theorem' which Coase disliked.
Coase On Transaction Costs And Rights
- The Problem of Social Cost shows that when transaction costs are zero, parties can bargain to reassign rights, but real-world transaction costs matter greatly.
- Misuse of the 'zero transaction cost' case led many to ignore the practical lesson about assigning property rights carefully.