Legal Fiction: An Intellectual History of the COASE Theorem

The Coase theorem has transformed economists’ analysis of phenomena known as “externalities,” situations in which the actions of one party have spillover effects on others (e.g., pollution), by suggesting that these problems can be successfully resolved through the market rather than requiring government intervention. While the revolutionary impact of the Coase theorem makes it an interesting topic for the historian of economics or law, there is a much larger set of factors that make the diffusion of the theorem a fascinating subject for the larger scholarly communities in economics, law, and beyond. Specifically, the theorem is a remarkable example of the vagaries that sometimes attend the diffusion of ideas and so constitutes a significant moment in the history of these disciplines.