In the introduction to his new online work, polymath Tyler Cowen identifies six or seven criteria for deciding who the greatest economist of all time is:
To qualify as “GOAT the greatest economist of all time,” I expect the following from a candidate. The economist must be original, of great historical import, serve as a creator and carrier of important ideas, have a hand in both theory and empirics, have a hand in both macro and micro, and be “not too wrong” on the substance of issues. Furthermore, the person also must be a pretty good economist! That is, if you sat down with the person and discussed economic issues, you would be in some way impressed.
Although Cowen does not assign weights to his criteria, by any measure the late English economist Ronald Coase is the true GOAT of economics.
Let’s begin with Cowen’s first criterion: originality. During his lifetime Coase came up with not one, but two original ideas! One is the concept of “marketing costs” (to use Coase’s preferred term), i.e. markets are not frictionless. Coase’s other original insight is that most harms are “reciprocal” or jointly-caused, i.e. so-called negative externalities are often the result of the actions and omissions of both the wrongdoer and the victim! (As an aside, this second idea is the subject of my 2023 Mercer Law Review article “Coase’s Parable“.)
Furthermore, Coase combined these two ideas to produce one of the most original and surprising theoretical insights in not one, but two different academic fields (economics and law), a result referred to in the literature as the Coase Theorem. In summary, when two conditions are met — namely, when transaction costs are zero, i.e. bargaining is costless, and when property rights are well-defined, i.e. the legal rules are clear cut — Coase’s counterintuitive theorem predicts that the victim and the wrongdoer will negotiate an optimal agreement (one that maximizes the total value of production) and the terms of the agreement will be the same regardless of what the actual legal rules are! (For an excellent survey of Coase’s contributions to economics and law, check out this beautiful essay by David Friedman.)
So Coase wins the theory and originality categories hands down. But what about the other criteria, such as historical import and empirics? Coase is the Michael Jordan of these categories as well, for he was not just an ivory tower thinker engaged in “blackboard economics” like most academic economists are — a point that Cowen himself concedes about modern-day economics in his introduction — for of all the great thinkers in the history of economics that Cowen surveys in his new book, Coase was the one economist whose ideas not only changed the world but who changed the world in a positive way!
In brief, Coase made a modest proposal in the late 1950s: the FCC should use markets to allocate broadcast licenses instead of holding costly and arbitrary administrative hearings or “beauty contests”. Although the idea of a market in broadcast rights was first dismissed as a joke, it was finally tested in the the 1990s, when the FCC started to use auctions to allocate spectrum rights. Suffice it to say, the rest is Internet history! (For more information about the impact of Coase’s ideas on the real world, check out this excellent paper by Thomas Hazlett, David Porter, and Vernon Smith.)
Okay, that still leaves Cowen’s “macro and micro” and “not too wrong” categories. Although Coase is not generally considered to be a macroeconomist like Lord Keynes or Milton Friedman, I shall explain in my next post why Coase should be … and why he without question wins that category as well!
prior probability 