Ronald Coase

A firm consist of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur.

— Ronald Coase

The question always is, will it pay to bring an extra exchange transaction under the organizing authority? At the margin, the costs of organizing within the firm will be equal either to the costs of organizing in another firm or to the costs involved in leaving the transaction to be “organised” by the price mechanism. Business men will be constantly experimenting, controlling more or less, and in this way equilibrium will be maintained. This gives the position of equilibrium for static analysis.

— Ronald Coase

American institutionalists were not theoretical but anti-theoretical.... Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire.

— Ronald Coase

Transaction costs were used in the one case to show that if they are not included in the analysis, the firm has no purpose, while in the other I showed, as I thought, that if transaction costs were not introduced into the analysis, for the range of problems considered, the law had no purpose.

— Ronald Coase

The traditional approach has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?

— Ronald Coase

In my view, what is wanted in industrial organization is a direct approach to the problem. This would concentrate on what activities firms undertake, and would endeavor to discover the characteristics of the groupings of activities within firms. Which activities tend to be associated and which do not? The answer may well differ for different kinds of firm.

— Ronald Coase

If you torture the data enough, nature will always confess.

— Ronald Coase

In mainstream economic theory, the firm and the market are, for the most part, assumed to exist and are not themselves the subject of investigation. One result has been that the crucial role of the law in determining the activities carried out by the firm and in the market has been largely ignored.

— Ronald Coase

The limit to the size of the firm is set where its costs of organizing a transaction become equal to the cost of carrying it out through the market. This determines what the firm buys, produces, and sells. As the concept of transaction costs is not usually used by economists, it is not surprising that an approach which incorporates it will find some difficulty in getting itself accepted. We can best understand this attitude if we consider not the firm but the market.

— Ronald Coase

In my youth it was said that what was too silly to be said may be sung. In modern economics it may be put into mathematics.

— Ronald Coase

I can't remember [of a good regulation]. Regulation of transport, regulation of agriculture—agriculture is a, zoning is z. You know, you go from a to z, they are all bad. There were so many studies, and the result was quite universal: The effects were bad.

— Ronald Coase

If economists wished to study the horse, they wouldn't go and look at horses. They'd sit in their studies and say to themselves, "what would I do if I were a horse?"

— Ronald Coase

What I have done is to show the importance for the working of the economic system of what may be termed the institutional structure of production.

— Ronald Coase

What is studied is a system which lives in the minds of economists but not on earth. I have called the result “blackboard economics.” The firm and the market appear by name but they lack any substance. The firm in mainstream economic theory has often been described as a “black box.” And so it is.

— Ronald Coase