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Neither misunderstood nor ignored: the early reception of Coase's wider challenge to the analysis of externalities


  • Steven G. Medema

    () (University of Colorado Denver - Department of Economics)


The ‘Coase theorem’ has long been the idea most commonly associated with Ronald Coase’s analysis in «The Problem of Social Cost». Yet, Coase frequently argued late in his career that he had been misunderstood, and that the central message(s) of the article lay elsewhere. Though virtually all of the discussion in decades following the publication of «The Problem of Social Cost» focused on Coase’s negotiation result, the fact is that Coase’s message was not, at the start, misunderstood. This paper takes up a number of the treatments of «The Problem of Social Cost» in the years immediately following its publication to demonstrate that Coase’s emphasis on the reciprocal nature of externalities, the importance of transaction costs, the possibility of merger solutions, the costs associated with state action, and the need for a comparative institutional approach were anything but lost on these early commentators. It was only later that the negotiation result became the major fixation of interpreters of Coase’s work.

Suggested Citation

  • Steven G. Medema, 2014. "Neither misunderstood nor ignored: the early reception of Coase's wider challenge to the analysis of externalities," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 22(1), pages 111-132.
  • Handle: RePEc:hid:journl:v:22:y:2014:1:6:p:111-132

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    Cited by:

    1. Gordeev, Dmitriy (Гордеев, Дмитрий) & Idrisov, Georgiy (Идрисов, Георгий) & Idrisova, Vittoria (Идрисова, Виттория) & Kaukin, Andrei (Каукин, Андрей), 2016. "Modeling the Spatial Distribution of Russian Foreign Trade Flows, Taking into Account the Real Costs of Transport [Моделирование Пространственного Распределения Российских Внешнеторговых Потоков С ," Working Papers 764, Russian Presidential Academy of National Economy and Public Administration.

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