IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

R. H. Coase and the Neoclassical Model of the Economic System

Listed author(s):
  • Harold Demsetz

R. H. Coase makes two claims in his most important articles: (1) a positive cost of using the price system is needed to explain the existence and importance of firms, and, therefore, neoclassical theory, which treats the price system as free to all, offers no explanation for the existence of firms, and (2) neoclassical theory's important deduction--that a private ownership, competitive economy allocates resources efficiently--is valid only if there is no cost to the provision and use of a price system. I reject both claims in this article and go on to argue that the assumptions that underlie neoclassical theory's perfect competition model are appropriate to the purpose for which it is intended; namely, to understand resource allocation in a private, decentralized economic system. The assumptions that underlie Coase's reasoning serve a different purpose--to understand organization within firms.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to the online full text or PDF requires a subscription.

File URL:
Download Restriction: Access to the online full text or PDF requires a subscription.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

Volume (Year): 54 (2011)
Issue (Month): S4 ()
Pages: 7-13

in new window

Handle: RePEc:ucp:jlawec:doi:10.1086/664179
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Harold Demsetz, 1968. "The Cost of Transacting," The Quarterly Journal of Economics, Oxford University Press, vol. 82(1), pages 33-53.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:doi:10.1086/664179. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.