Ronald Harry Coase

(1910- )

Franco Du Plessis 16724011

Mr. M van Schoor

Introduction

George Bernard Shaw once said that "Economics is the art of making the most out of life".At the age of a hundred-and-one Ronald Coase certainly seems to have emulated this in his life and achievements which I will now discuss in the text to follow.(Mohr,Fourie et al.,2008:3)

Biography

Ronald Harry Coase was born on the 29th of December 1910 in the London suburb of Willesden. As a young boy he suffered from a condition which caused a weakness in his legs and made it necessary for him to wear leg-irons, which resulted in him attending the school for physical defectives. . Although neither of his parents completed school, both of them were completely literate and they both shared a big love for sports. Despite his parents interest in sports Ronald Coase was always more interested in academic scholarship. At the age of 12 he wrote the entrance examinations for secondary school after which he was awarded a scholarship to attend the Kilburn Grammar School. He matriculated in 1927 with distinctions in history and chemistry. Coase then attended the London School of Economics from which he received a Bachelor of Commerce degree in 1930.

Achievements and Contributions

In 1991 Ronald Coase received the 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" . (Library of Economics and Liberty,2008) .People say that Coase is an unusual economist for the 20th century as well as an unusual Nobel Prize winner. This is mainly due to two reasons; the first being that he uses very little mathematics. The second reason is the fact that his writings are so sparse. In his 60-year-career as a economist he only wrote a dozen or so significant papers. Two of his articles however have to be singled out as having contributed the most to his profound impact on economics .

The first article "The Nature of the Firm" was published in 1937 when he was twenty-seven years old and its central theme was Coase's perception of the reason why firms exist. In this article he poses the question that, if production could be carried out without firms, why then do firms exist?

He then provides the answer to this question by using the concept of transaction costs as the basis for his argument. Coase argues that if there were no costs associated with using markets, firms would not exist. However , because there are a number of costs to using markets(bargaining costs, search and information costs etc.) markets are costly to use and firms are generally the place where most efficient production take place. This, according to Coase, is the reason why firms exist.

The second article "The Problem of Social Cost" was published in 1960 when he was fifty years old. In this article Coase argued that through mutually effective bargaining and effective property rights the problems arising from negative