Trigger warning: Today’s post will be deliberately provocative and inflammatory!
Instead of recognizing an econ giant like Richard A. Posner or Thomas Sowell, the 2026 Nobel Prize in “economic sciences” (see here) went to Robert Hall (Stanford) and Michael Woodford (Columbia). Alas, this year’s prize will be all but forgotten by the end of this week, if not sooner. (Compare all four of their Wikipedia pages if you don’t believe me.)
My wife and I finally saw Aaron Sorkin’s long-awaited sequel to The Social Network this past weekend. To minimize spoilers, here are my top-three takeaways:
The Good: Should Facebook “fact-check” political ads? My favorite scenes in The Social Reckoning are the tense exchanges between Jeremy Strong and Bill Burr (see, for example, the film clip posted below), but the sequel is nowhere near as good as The Social Network.
The Bad: Alas, the sequel is a day late and a dollar short, for as evil as Zuck might be [*], Facebook and other social media platforms are now “small potatoes” compared to, say, Anthropic’s Claude and OpenAI’s ChatGPT.
The Ugly: If The Social Reckoning is to be believed, Facebook played a pivotal role in the chain of events leading up to the violent insurrection in Washington, D.C., on January 6, 2021. (Or to be more precise, it was a series of changes that Facebook made to its secret algorithms that created the conditions that led to J-6.) The sequel thus poses a critical counterfactual question: would J-6 have still occurred had these behind-the-scenes changes not been made?
[*] Is Zuckerberg, for example, lawful evil, neutral evil, or chaotic evil?
Did you know that it was Cristóbal Colón (a/k/a Christopher Columbus) who, in addition to his maritime exploits, initiated the longest-running lawsuit in history? According to Daniel Voelker (see here or here), an attorney who has conducted extensive research on this epic case, the so-calledPleitos Colombinos (“Colombian Lawsuits”) began with a contract drawn between Colón and his royal patrons, the Catholic Monarchs of Spain, Queen Isabella I of Castile and King Ferdinand II of Aragon:
“The royals agreed, in writing, known as the ‘Capitulations of Santa Fe,’ to give [Colón] and his heirs ‘ten percent of all the wealth he discovered and claimed for the Crown on his voyages made on their behalf’ as well as land grants, extravagant titles and untold potential powers in the New World, in perpetuity.”
According to Voelker, the contract would be valued at over $100 trillion USD in today’s currency and would have made the Colón family the wealthiest in recorded history, but it was not to be. Colón fell out of favor and the royals reneged on their agreement. (The Crown’s defense to the lawsuit was that it was Martín Alonso Pinzón, the captain of the Pinta, who actually discovered the New World!)
The legendary explorer thus spent his final days poor and destitute, and his lawsuit dragged on for three centuries and involved ten generations of the Colón family. Postscript: This four-volume, 3,600-plus page collection (pictured below) contains the main legal documents in this historic case.
I just discovered that Univeristy of Chicago law professor Randal C. Picker (pictured below) died unexpectedly at age 66 on August 15. (See here.) Although I never had the pleasure of befriending Professor Picker in person, our scholarly paths intersected in three ways: I visited the University of Chicago Law School and read his book (with Douglas G. Baird and Robert H. Gertner) on Game Theory and the Law in the early 2000s, and I was also among the first cohort of students to enroll in and complete his massive open online course (MOOC) on “Internet Giants: The Law and Economics of Media Platforms” in 2015. In addition to his intellectual honesty and scholarly productivity, what I especially admired about him (as his student) was his “show, don’t tell” teaching style.
File under A.I. slop or cutting-edge science? Did you know that just a few days ago (6 October 2026, a day that may live in mathematical infamy!) OpenAI published hundreds of manuscripts on unsolved math problems in one fell swoop, [*] crediting these works to an internal frontier model it has not named and has not yet released? (See here or here, for example.) On this note, check out the Association for Human Mathematics (AHM)’s Statement on OpenAI’s October 6 Release of Mathematical Documents: https://ahmath.org/statements (hat tip: @pickover). Some of the most provocative excerpts are posted in the tweet below:
It's interesting to see how some mathematicians are negatively reacting to the use of AI to solve famous and important math problems.
For contrary views, see here, here and here. So, which side are you on? Team AI or Team Anti-AI? Also, are these secret frontier LLM models “pro-science” or “anti-science”? (PS: As of yesterday, the AHM had over 800 members.)
Yo, I have posted to SSRN a preprint of my new paper “Adam Smith and the ‘Absurd Prescriptions’ of Doctors“, which surveys Smith’s documented encounters with the doctors and medical treatments of his day. (Full disclosure: I did not use any A.I. whatsoever to research or write my paper.) Also, starting soon, I will begin blogging about another aspect of the celebrated political economist’s life: his paradoxical stint as one of Scotland’s Commissioners of Customs, where his central and sole duty was to enforce the very same mercantilist laws he so vehemently and justly denounced in The Wealth of Nations.
To recap my series of blog posts on Ronald Coase, I have been tracing the intellectual origins of what I like to call “Coase’s axiom”: the counter-intuitive idea that harms are a reciprocal problem. Did his axiom originate with with Frank Knight’s critique of A. C. Pigou? [1] With Arnold Plant’s courses on industrial law while Coase was a student at the London School of Economics (LSE), [2] or more generally, with the opportunity-cost approach to economics that was developed at the London School of Economics in the 1930s? [3] What about Wesley Hohfeld’s theory of legal relations? [4]
I will now conclude my series with two observations. One is that the answer to the questions I have posed in the previous paragraph is most likely “All of the Above.” The other is that Coase’s notion of reciprocal harms is qualitatively different than anything else that came before him: Knight, Plant, and the so-called “LSE tradition” all focus on costs, while Hohfeld’s focus is on reciprocal rights and duties. The scope of Coase’s axiom, by contrast, is far more expansive, for Coase is concerned not just with costs but more broadly with harms.
More specifically, the available evidence indicates that Coase most likely experienced his eureka moment — the idea that all harms are reciprocal — while he was a visiting fellow at the Center for Advanced Study in Palo Alto, California (pictured below), during the 1958-59 academic year. (As an aside, among Coase’s cohort of scholars at the Center that year were the influential anthropologist Clifford Geertz, the historian of science Thomas S. Kuhn, and the philosopher W. V. Quine! See here and here, for example.) After all, the first time Coase’s model of reciprocal harms appears anywhere in print is in his 1959 FCC paper, and by Coase’s own admission, he did not begin writing his FCC paper until he was at the Center for Advanced Study in Palo Alto during his 1958-59 sabbatical. [5]
As a result, given the timing of Coase’s publications as well as the expansive nature of how Coase frames the problem of harmful effects in his 1959 and 1960 papers — given the plain and simple fact that Coase’s axiom is qualitatively different than anything that came before those landmark papers — my best guess is that it was Coase himself who, sometime during his California sabbatical, came up with his bold idea of reciprocal harms.
[1] See Frank H. Knight, “Some Fallacies in the Interpretation of Social Cost,” Quarterly Journal of Economics, Vol. 38, No. 4 (1924), pp. 582–606; reprinted in George Stigler and Kenneth Boulding (eds.) Readings in Price Theory (1952), pp. 160-179.
[2] Recall that Coase had enrolled in an undergraduate commerce degree at the London School of Economics in 1929 and had attended the lectures of Arnold Plant during his second year of studies. See Ronald H. Coase, “Economics at LSE in the 1930’s: A Personal View,” Atlantic Economic Journal, Vol. 10 No. 1 (1982), pp. 31-34. See also Alain Marciano, “Ronald H. Coase (1910–2013),” in The Palgrave Companion to LSE Economics (2019), pp. 555-557.
[3] See, e.g., James Buchanan, “Introduction: L.S.E. Cost Theory in Retrospect,” in Buchanan & Thirlby (eds.), L.S.E. Essays on Costs (1981), pp. 1-18.
[4] See W. N. Hohfeld, “Some Fundamental Legal Conceptions as Applied in Judicial Reasoning,” Yale Law Journal, Vol. 23, No. 1 (1913), pp. 16-59.
[5] Coase: “I began writing the FCC paper and developing the ideas [in that paper] while I was at the Center for Advanced Study in Palo Alto in 1958-59. Milton and George had been there the year before, and they had recommended that I go there.” (Quoted in Edmund W. Kitch, “The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970,” Journal of Law & Economics, Vol. 26, No. 1 (1983), pp. 163-234, at p. 222.) As a further aside, this Center opened in 1954, so Coase was one of the first fellows to visit there.
In my previous post, we saw Frank Knight’s critique of A. C. Pigou’s economic analysis of traffic congestion. For Pigou, road congestion is a tragedy of the commons or market failure that requires active government intervention: the imposition of a tax or congestion fee to reduce the number of drivers on the road. For Knight (and for his disciple, Coase), however, road congestion is a legal failure: the absence of property rights in roadways. Today, I want to take a closer look at the logic of Knight’s critique of Pigou.
To begin, why does Knight tweak Pigou’s hypothetical example of road congestion? In Pigou’s original setup (Pigou 1920, p. 194), “there are two roads ABD and ACD both leading from A to D.” Knight, by contrast, modifies Pigou’s hypothetical example. In Knight’s modified hypo, one of the roads is shoddy and full of potholes but wide enough to handle a lot of extra traffic, while the other road is in perfect condition but too narrow to accommodate too much traffic:
“Suppose between two points there are two highways, one of which is broad enough to accommodate without crowding all the traffic which may care to use it, but is poorly graded and surfaced, while the other is a much better road but narrow and quite limited in capacity.” (Knight 1924, p. 584; Knight 1952, p. 162; footnote omitted)
Next, Knight concedes that “the narrower and better road” will become congested because too many drivers (“too many”, that is, relative to the narrow road’s optimal carrying capacity) will prefer the good road over the bad one:
“As more trucks use the narrower and better road, congestion develops, until at a certain point it becomes equally profitable to use the broader but poorer highway. The congestion and interference resulting from the addition of any particular truck to the stream of traffic on the narrow but good road affects in the same way the cost and output of all the trucks using that road.” (Knight 1924, p. 585; Knight 1952, p. 162)
But then, after summarizing Pigou’s market failure argument and Pigou’s preferred solution (i.e. the imposition of a congestion fee by the government ), Knight explains why this road congestion example is just as much a legal failure (the absence of property rights) as it is a market failure (tragedy of the commons):
“The owner of a superior opportunity for investment can set the charge for its use at any amount not greater than the excess of the product of the first unit of investment above what that unit could produce on the free opportunity. Under this charge investment will flow into the superior road up to the point where congestion and diminishing returns set in.” (Knight 1924, p. 587; Knight 1952, p. 164)
Here comes the crucial masterstroke, a move that Coase must have taken close notice and made a careful note of at some point in his storied academic career. Knight reframes the traffic congestion example by turning it on its head:
By reducing the charge, the owner will increase the amount of traffic using his road (or in general the amount of investment of labor and capital in any opportunity). But obviously the owner of the road will not set the charge so low that the last truck which uses the road secures a return in excess of the amount which it adds to the total product of the road (that is, of all the trucks which use it). This is clearer if we think of the owner of the road hiring the trucks instead of their hiring the use of the road. The effect is the same either way; it is still the same if some third party hires the use of both. The toll or rent will be so adjusted that added product of the last truck which uses the narrow road is just equal to what it could produce on the broad road. No truck will pay a higher charge, and it is not to the interest of the owner of the road to accept a lower fee. And this adjustment is exactly that which maximizes the total product of both roads.
Although Knight does (yet!) not use the actual word “reciprocal”, the upside-down Alice-in-wonderland logic of his reasoning in this crucial passage is undeniable, for Knight is telling us that we can frame the traffic congestion problem in one of two ways: as drivers independently choosing which route to take in order to reach their destination, or as road owners choosing how many truck drivers to allow on their roads, and whether we adopt the point of view of the truck drivers or the point of view of the road owner, costs are going to be unavoidable!
In fact, it is at this crucial point in his devastating takedown of Pigou — that is, right after explaining the reciprocal logic of his reasoning — that Knight introduces three diagrams to the depict congestion costs in his hypothetical road example and uses the word “reciprocal” to describe the relationship between the cost curves in two of the diagrams. (For reference, the two relevant diagrams and cost curves are pictured below.)
Notice how the cost curves in Knight’s diagrams are mirror images of each other. Why are they reverse images of each other? Because one is expressed in terms of outputs while the other is expressed in terms of inputs: the upward-sloping curve in the chart on the left (Chart C) “is a cost curve for the narrow road, showing the cost of successive units of output” (Knight 1924, p. 588; Knight 1952, p. 165; emphasis in the original), while the downward-sloping curve in the chart on the right (Chart D) “represents the same facts as Chart C [the chart on the left] but in terms of the product of successive units of investment [i.e. inputs] instead of the cost of successive units of output.” (Knight 1924, p. 589; Knight 1952, p. 165)
In short, the cost curves in Knight’s diagrams depict the reciprocal relationship between road owners and truck drivers, i.e. the reciprocal logic of “the owner of the road hiring the trucks” and the truck drivers “hiring the use of the road.” More importantly, in the words of Frank Knight, words that must have resonated with Ronald Coase at some point in his academic career: “The argument is the same [i.e. whether we think of the owner of the road hiring the trucks instead of their hiring the use of the road], but stated in inverse or reciprocal form.” (Knight 1924, p. 589; Knight 1952, p. 166; my emphasis)
But even if Ronald Coase was influenced by Knight’s reasoning (after all, Coase and Knight’s papers have similar titles and attack a common enemy, Pigou), Coase goes a step further — one big step further — for Coase frames all harms as a reciprocal problem. Why and when did Coase make this leap? I will present my own conjecture regarding the origins of Coase’s reciprocal-harm axiom when I conclude this series in my next post.
