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The Firm, the Market, and the Law Paperback – February 15, 1990

ISBN-13: 978-0226111018 ISBN-10: 0226111016 Edition: Reprint

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Product Details

  • Paperback: 217 pages
  • Publisher: University Of Chicago Press; Reprint edition (February 15, 1990)
  • Language: English
  • ISBN-10: 0226111016
  • ISBN-13: 978-0226111018
  • Product Dimensions: 8.7 x 5.5 x 0.4 inches
  • Shipping Weight: 9.6 ounces (View shipping rates and policies)
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (20 customer reviews)
  • Amazon Best Sellers Rank: #147,032 in Books (See Top 100 in Books)

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Customer Reviews

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Good institutions are the ones that reduce transaction costs to a minimal level.
D. W. MacKenzie
Any person who is interested in economics should read this book, and if this has been done before, then read it again!
De-Xing Guan
This book is a reprint of several of Coase's previous works together with an introduction that links them.
J. F. Montgomery

Most Helpful Customer Reviews

60 of 63 people found the following review helpful By Stephen M. Bainbridge on February 20, 2001
Format: Paperback
Ronald Coase is a Nobel Prize-winning economist, whose work is probably cited more often by lawyers than by economists. "The Firm, The Market, and the Law" is principally a collection of his seminal scholarship, although it does contain some useful new material. The opening chapter is new and shows how a consistent theory of firms and markets, as well as a unique conception of economics and economically-oriented scholarship, runs through Coase's work from the 1930s to the late 1980s (when the book was published).
Coase is best known for two seminal articles. The earlier article "The Theory of the Firm" is the seminal work on the so-called nexus of contracts theory of the firm, as well as an early source for the transaction cost branch of the New Institutional Economics. The nexus of contracts model treats the firm not as an entity, but as an aggregate of various inputs acting together to produce goods or services. Employees provide labor. Creditors provide debt capital. Shareholders initially provide equity capital and subsequently bear the risk of losses and monitor the performance of management. Management monitors the performance of employees and coordinates the activities of all the firm's inputs. The firm is simply a legal fiction representing the complex set of contractual relationships between these inputs. Besides emphasizing the importance of examining the various contracts making up the firm, however, Coase's fundamental insight was that the contractual nature of the firm does not preclude an element of command and control absent from market transactions. If a corporate employee moves from department Y to department X he does so not because of change in relative prices, but because he is ordered to do so.
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24 of 26 people found the following review helpful By Max More on July 18, 2001
Format: Paperback Verified Purchase
This collection of seven of economist Ronald Coase's essays provides important understanding of the workings of market economies, the boundary between private and public, and what determines the size and structure of a firm. Coase distinguished his work from other economists by focusing on the role of transaction costs-now a common theme in discussions of the new economy. If you read only one of the chapters, it should be "The Nature of the Firm". Here Coase provides the intellectual foundations for strategic thinking about business architectures, mergers and acquisitions, outsourcing, and collaborative commerce. Some of this work was later elaborated on by Oliver Williamson (see his 1985 book, The Economic Institutions of Capitalism.) Like Joseph Schumpeter, Ronald Coase is an economist whose works from decades ago are now more relevant than ever. While Schumpeter's phrase "creative destruction" may be more memorable, in the end it is Coase's views on transaction costs and the nature of the firm that may be the more significant (and certainly more readable).
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20 of 21 people found the following review helpful By A Customer on June 22, 1997
Format: Paperback
This book consists of Nobel Prize winner Ronald Coases classic articles where the 1937 _Nature of the Firm_ and The 1960 _The Problem of Social Cost_ stands out.

This is _the_ book to own on the subject as Coase takes his time to explain some of the reasons why economists in general has misunderstood his argument.

It is also well worth reading if you like Oliver Williamson's elaborations on the subject as a reading of Coases original articles reveals much of Williamsons work as just that. If you haven't read Williamson's 1985 The Economic Institutions of Capitalism book I recommend it highly _after_ you've read this.
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11 of 11 people found the following review helpful By D. W. MacKenzie on April 7, 2008
Format: Paperback
The essays in this book are the foundation for New Institutional Economics. Coase arrived at a simple explanation for institutions: transaction costs. In 1937 Coase argued that organizations exist because of high transaction costs, or what he referred to as market costs. This 1937 article became chapter two. It also became the basis for the modern theory of the firm, as developed by Williamson, Demsetz, Fama, and many others.

Coasean economics is important because it pushes us to make fair and realistic comparisons between private and public institutions. In 1959 Coase published an article on the Federal Communications Commission which demonstrated that market imperfections do not automatically imply the need for government regulation. Transaction costs make markets imperfect, but government suffers from its own imperfections. In 1969 Harold Demsetz explained the Coasean approach to institutional analysis in his "Institutions and Efficiency, another Viewpoint". Coase's opponents are guilty of committing the Nirvana Fallacy. Economists used to condemn markets for failing to deliver ideal conditions. Those who compare real imperfect markets to an idealized perfect government will always "prove" the need for government regulation. In reality, the nirvana of perfect government never exists, so the need for governmental intervention is always questionable.

Unfortunately, this 1959 article did not make it into this book. Instead, Coase used his 1960 follow up paper "The Problem of Social Cost" (chapter five) to explain his ideas about law and economics. Chapter five explains "The Coase Theorem" and "The Invariance Proposition". The 1960 paper on social costs is an outgrowth of an informal debate between Coase and Milton Friedman.
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