Posner: Keynes and Coase

Coase Conference: Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase, University of Chicago Law School. Richard A. Posner, U.S. Court of Appeals for the Seventh Circuit, Senior Lecturer, University of Chicago School of Law.


At first glance Keynes and Coase have nothing in common except that they were great English economists who loved ballet and attacked Pigou (a colleague of Keynes’s at Cambridge—the professor of economics, Keynes being merely a fellow)—but attacked different parts of Pigou: his theory of unemployment, in the case of Keynes, and his theory of externalities, in the case of Coase. That is not much to build a comparison on. Keynes was liberal, Coase is conservative. Keynes was a macroeconomist, Coase is a microeconomist. Keynes was upper class, a celebrity, a great public figure, a baron, a man of the world, a speculator, in his youth a homosexual (what we who study such things call an “opportunistic homosexual”), a brilliant writer on diverse subjects, a best seller—a man of Eton, Cambridge, the Apostles, Bloomsbury. Ronald is none of these things. And he is an expatriate— almost an American. Keynes didn’t much like Americans. But these differences are superficial from the standpoint of how one approaches economics. Keynes and Coase shared an approach to economics that was once dominant, that fell into disfavor, but that is undergoing a revival as a result of the worldwide financial crash of September 2008, which took the economic profession by surprise and created profound doubts about the profession’s understanding of the economy.

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