19.91 Ronald H. Coase

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1991 Ronald H. Coase "for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy"

property rights should be assigned such that the owner of the rights wants to take the economically efficient action.

Coase noted, however, a number of transaction costs involved in using the market; the cost of obtaining a good or service via the market actually exceeds the price of the good. Other costs, including search and information costs, bargaining costs, keeping trade secrets, and policing and enforcement costs, can all potentially add to the cost of procuring something from another party. This suggests that firms will arise which can internalise the production of goods and services required to deliver a product, thus avoiding these costs. This argument sets the stage for the later contributions by Oliver Williamson: markets and hierarchies are alternative co-ordination mechanisms for economic transactions.[17] There is a natural limit to what a firm can produce internally, however. Coase notices "decreasing returns to the entrepreneur function", including increasing overhead costs and increasing propensity for an overwhelmed manager to make mistakes in resource allocation. These factors become countervailing costs to the use of the firm.

Nearing his 100th birthday, Coase was working on a book concerning the rise of the economies of China and Vietnam.[8] An interview with Coase was conducted by Wang Ning (co-author of the book How China Became Capitalist) 28–29 December 2010, in Chicago. In the interview, Coase explained the mission of the Coase China Society and his vision of economics and the part to be played by Chinese economists.[9][10] Coase was honoured and received an honorary doctorate from the University at Buffalo Department of Economics in May 2012.[11]