This is an introduction to the twelve essays in the special memorial issue in honor of Ronald Coase. It includes a brief account of Coase's long life and some of its many achievements. Coase's distinctive, worldly and empirically-grounded approach to economics is highlighted, claiming that it has yielded major theoretical and policy insights. This introduction concludes with a summary of the contributions of the twelve essays.

This essay outlines the contributions of Ronald Harry Coase (1910–2013) to institutional economics, noting his insistence on the importance of studying real world institutions and his personal contribution as an institution builder.

Ronald Coase had a profound impact on scholarship worldwide, and not for his ideas alone. Coase's ideas about transaction costs, the nature of the firm, the role of government, and the problem of social cost have been hugely influential. Throughout his long life, he also worked to change the conduct of economics, urging economists to ground their conclusions in careful study of empirical reality rather than theories that work only on the blackboard. Less well known, perhaps, is his work to nurture and shape the emerging fields of law and economics and new institutional economics, or his support to young scholars studying institutional issues around the world. In his final years, he was preoccupied by the rapid transformation of China and the institutional structure of production. This article summarizes Coase's significant intellectual contributions to economics, pointing out along the way some of the traits that made him such a powerful thinker and exceptionally influential scholar.

Ronald Coase's work and its reception illustrate the significance – and the difficulty – of identifying problems and proposing solutions, which provides the theme of this paper. His theoretical innovation was not derived from economics, and seemed irrelevant to contemporary issues of economic theory and policy; only his much later perception of an apparently unrelated problem – the incoherent treatment of social cost as market failure – showed how the concept of transaction costs could illuminate two major areas of economics. The inadequate treatment by economists of the transaction costs of markets is linked to the neglect of processes, and especially the processes of organising the growth and use of knowledge – key concerns of Smith and Marshall. The curious relationship between Coase's explanation of firms and Austin Robinson's analysis of competitive industry leads to a reflection on the scarce resource of human cognition and the role (and fallibility) of institutions.

One of the main contributions of Ronald H. Coase was to demonstrate how mainstream economics was based on a contradictory amalgam of costly physical inputs and free institutional resources, and to give origin to the economics of institutions: each institution is a mode of allocation and organization of economic resources that is to be investigated. In particular, none of the institutions (including the market) is a free lunch. The Coasian approach regards institutions as costly substitutes and provides a fundamental starting point for comparative institutional analysis. However, Coase neglected two issues deriving from the observation that institutions are not cost-free. First, when institutions are costly, one should not only consider their possible substitutes but also how complementary institutions affect their costs, as well as the costs of the possible institutional substitutes. Second, the economic analysis should also take into account that the transition from one institutional setup to another cannot occur in costless meta-institutions. The initial conditions may substantially affect the final institutional arrangements. Both the novelty of Coase's approach and its limits were grossly undervalued. In particular, the costly institutions assumption requires a view of economics as a historical discipline.

This paper examines markets, firms, and the law as alternative institutional arrangements for organizing transactions that involve transaction-specific investments and uncertain performance. The analysis is the logical extension of Coase's seminal analysis of the market-firm boundary on one hand, and the market-law boundary on the other. It thus combines insights from the literature on industrial organization and law and economics. The result is a unified framework that reveals the relative advantages and disadvantages, within a fairly simple economic setting, of market exchange, court ordering (contracts), and internal governance (agency).

This paper revisits Coase's original description of the Institutional Structure of Production, and disentangles its two constitutive elements: (i) the costs of organizing an activity internally and (ii) the costs deriving from the transaction of the activity on the market. In doing so, I show transaction costs (TC) to be always necessary and sufficient to explain institutions, but only in the Slutsky–Hicks and Samuelson ordinal framework where expenditure functions replace utility functions and actors merely transact services and never control, nor own goods. Yet, if actors can purchase (and therefore control) resources, utility in use cannot be univocally deduced from purchasing behaviours; here ordinal exchange theory must be replaced by Austrian subjective cardinal value theory, where value in use and value in exchange do not coincide. To explain the allocation of activities among firms in this case, actors’ subjective opportunity costs are thus always necessary (and possibly sufficient), while TC are never sufficient. This distinction has fundamental implications for at least two main developments of Coase's original insights: the relationship among competition, socialist planning and the nature of the firm, and the reinterpretation of the Austrian concept of asset specificity in contemporary institutional and organizational economics (OE).

Coase always expressed dissatisfaction with neo-classical economics and advocated for a new approach. Rather than using toy mathematical models built from unrealistic, idealized assumptions, Coase preferred to study real-world contexts, including actual legal cases. He demonstrated the utility of his approach in ‘The Problem of Social Cost’. Yet almost all of Coase's contemporaries completely ignored, Coase's call for a new approach and his sustained use of legal cases to illustrate his arguments and to situate his analysis in reality. In this paper, we show that the profession interpreted Coase's seminal article exactly the opposite of what he had intended, and reduced his analytical contributions to a toy model of the exact sort he was criticizing. This ironic history of the most cited article both in law and in economics helps us understand the development of ideas within both fields and how disciplinary blinders shape intellectual progress.

The Coase theorem, circa the 1970s, had no settled meaning or content; instead, that meaning and content was created – and in differing ways – by the modeling choices of scholars who attempted to grapple with and assess the proposition that Coase had laid out in 1960. These modeling decisions included both the theoretical frameworks laid onto the theorem and the assumptions (including meanings ascribed thereto) said to underlie it. The present article illustrates this using the 1960s and 1970s extortion debate as a backdrop, showing how conclusions reached regarding the theorem's validity hinged on the Coase theorem worlds created by the authors involved.

There exists a long line of challengers to the ‘Coase Theorem’. All of these rest on fundamental misconceptions of property rights, transaction costs, and their interaction. Here I examine two attacks that have gone unchallenged: one by Halpin, the other by Usher. I argue that both, in failing to either use or understand an adequate definition of transaction costs, fail to deliver a fatal blow to Coase's famous idea.

Laying the foundations of property rights economics stands out among Ronald Coase's many seminal contributions. This approach had an impact on a number of fields in economics in, particularly, the 1960s and 1970s. The modern body of property rights economics mainly originates in the work Oliver Hart and is quite different in style, scope, and implications from the original property rights economics of Coase, Demsetz, Alchian, Cheung, Umbeck, Barzel, etc. Based on our earlier work on the subject (Foss and Foss, 2001), we argue that the change from Mark I to Mark II property rights economics led to a substantial narrowing of the scope of property rights economics, somewhat akin to a Kuhnian loss of content. In particular, Mark II property rights economics make strong assumptions concerning the definition and enforcement of ownership rights made which lead to many real life institutions and governance arrangements being excluded from consideration, and a much more narrow focus than that of the rich institutional research program initiated by Coase and his followers.

‘The Problem of Social Cost’ (Coase, 1960) asserts a normative role for the common law judge, that of taking into account the economic consequences of his decisions in allocating property rights. This position is often accused of inconsistency: Coase sees the figure of the judge as willing and able to improve economic efficiency, but criticises the actors of public intervention, particularly regulators, for being fallible, vulnerable to political pressures, and lacking information. I shall show that Coase's giving this role to the judge stems precisely from his criticism of public intervention. This means that his figure of the judge escapes the tenets of the theoretical system that first rendered it necessary. Various reasons could explain this difference of treatment as between the judge and the other figures of public intervention in Coase's system, but Coase makes too strong an opposition between common law on one side and regulatory and statutory law on the other, and leaves unexplained the motivation of judges.

In this contribution, we address the introduction of private property rights and market trades in the use of the radio frequency spectrum. We discuss the UK case being inspired by the ideas of Coase. We discuss how an appropriate design of property rights and a secondary market would look like and how the developments after the introduction of property rights could be interpreted. Subsequently we present the alternative perspective of Commons to illuminate the implications of a Coasean perspective. It is shown how Coase's focus is on efficiency, whereas in the world of Commons, the societal value is central. We discuss how the two perspectives can contribute to the understanding of the governance of the radio spectrum and conclude with policy recommendations.