Tuesday, September 3, 2013

An economic loss to society

The passing of Ronald Coase makes us poorer in our ability to conceptualize complex problems that affect society at large and solve them elegantly. He made two invaluable leaps in economics, while teaching law at the University of Chicago and those insights stood the test of time. “The nature of the firm",” survived through industrial revolution into information revolution providing a simple and complete framework to analyze and understand scale and scope of firms. He will repeat it again in “the problem of social cost,” with a clear articulation of the cost of blind government intervention, with normative prescriptions for auctions and allocations.

The elegance of these observations was astonishing and they left mere mortals, yearning for intellectual stimulation. It has influenced a wave of innovation in economic thinking under the umbrella of Chicago school, where frameworks based on a set of principles yielded tools with broad applications to every aspect of society. This ability to solve problems top-down, uncluttered by data and anecdotes, is a skill that is waning. In the contemporary world of “big noise,” where academics and practioners scramble to create and prove hypotheses, such insights are very rare.

A true economic loss to society - perhaps educators and policy-makers may take a moment to look back and see the brilliance.