Happy Birthday, Ronald Coase and Thank You for Our Logo!
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• Wednesday, December 29, 2010
Ronald H. Coase, winner of the 1991 Nobel Prize in Economic Science, turns 100 today, still publishing.
As The Economist magazine pointed out in its recent tribute to his work on firms:
He has long chided his fellow economists for scrawling hieroglyphics on blackboards rather than looking at what it actually takes to run a business.
He similarly refused to fall in line with the much-vaunted economic practice to “assume” when it came to other economists’ use of the lighthouse as the example of a quintessential public good—leading our founder David Theroux to choose the lighthouse as our logo 25 years ago:
The Independent Institute’s logo was inspired by Ronald Coase’s renowned 1974 essay in the Journal of Law and Economics, “The Lighthouse in Economics,” (reprinted in the book, The Firm, the Market and the Law, by Ronald Coase). Until that time, conventional wisdom from John Stuart Mill to Paul Samuelson had claimed that the lighthouse was the quintessential “public good,” which allegedly had to be provided by government due to the inherent free-riding of those who could not be charged for the services being provided. Coase showed, however, that in Britain, “contrary to the belief of many economists, a lighthouse service can be provided by private enterprise… The lighthouses were built, operated, financed and owned by private individuals, who could sell a lighthouse or dispose of it by bequest. The role of the government was limited to the establishment and enforcement of property rights in the lighthouse.” Only later did the British government consolidate all lighthouse services under its own monopoly in order to eliminate competition and directly reap the financial benefits developed by private entrepreneurs.
In addition to exposing the fallacies of a favorite public-goods rationalization, Coase’s essay rescued the lighthouse as a symbol of courage, enlightenment and independence.
The one occasion on which I was fortunate to meet Dr. Coase was at a dinner shortly after he won the Nobel Prize. He told the story of how the Nobel Committee had had some difficulty locating him to inform him of his winning. As it turns out, he was in Tunisia, buying a bird cage. It so happens that David and I have a Tunisian bird cage hanging in our entry, a present from my sister Julie, and after the dinner told Dr. Coase that we shared his admiration of the exquisite Tunisian bird cages. Whereupon he pulled from his breast pocket a photo of himself standing in front of the shop in Tunisia, with his newly purchased bird cage in hand: the moment he won the Nobel Prize.
Thank you, Dr. Coase, and may up-and-coming economists follow your shining example of getting out of their models and into the real world!