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Poor Ronald Coase. In an introductory essay to a recently published collection of his articles, Coase laments his lack of influence among economists. "My point of view has not in general commanded assent, nor has my argument, for the most part, been understood." One can imagine the muttering that Coase's plaint will provoke in the university towns across America. "Wait a minute, buster," will grouse the professors. "It must be tough when you've merely written the most cited article in the legal literature and when Yale has been bothering you with the offer of an honorary degree. Listen up and we'll tell you some stories about scholarship that has gone underappreciated."
But wait! After reading John Donohue's stimulating and useful contribution to this issue, one can see that Coase indeed deserves some sympathy. In Donohue's article, which in this regard is representative of lawand- economics writing in general, Coase's name is consistently attached to propositions that he has explicitly repudiated. Predictions identified as "Coasean" are predictions that Coase would never make. The "Coasean world" is not only not Coase's world but, ironically, is more like the world of the economic theorists that Coase has attacked. The "Coasean River" in Donohue's title is not one that Coase believes has ever flowed. Just as some believe Marx would complain of what is currently done in the name of Marxism, Coase has reason to be appalled at the emerging contours of "Coaseanism."
I will set forth some basic propositions of law-and-economics that are different from, and more promising than, the "efficiency,' "invariance," and "distributional" predictions that Donohue labels "Coasean." My propositions are not only more consistent with Coase's actual beliefs about the world but, more pertinently, also constitute a better foundation for work in law-and-economics. In offering this alternative, I do not intend to slight Donohue's substantial accomplishments. He deserves particular credit for recognizing that a treasure was hidden within Woodbury and Spiegelman's grand experiment with $500 bonus payments to reward the speedy reemployment of Illinois workers who had been collecting unemployment insurance benefits. Because one branch of the Illinois experiment offered bonuses to workers and another branch offered bonuses to employers, Donohue saw that Woodbury and Spiegelman's results would provide a prism on the assumptions underlying the Coase Theorem. Although I will stress my differences with Donohue, he and I agree on many points, particularly on the proposition that in most instances the world is full of transaction costs.
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