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6 THE LAWYERLY RHETORIC OF COASE'S liTHE NATURE OF THE FIRM" Coase Solved His Problem of Ethos by Appeal to Axiom and Proof An author, twenty-seven years old in 1937, of an essay called imposingly "The Nature of the Firm," an author who had not published a line when he drafted the article (early summer 1934; see Coase 1988c, p. 19; it was based closely on a lecture he gave in October 1932, at age twenty-one), "a young man who knew virtually no economics " (Coase 1988d, p. 35), had a problem. The problem was to establish in the reader's mind a character worth listening to. In 1960, by contrast, forty-nine years old and well-known if not yet famous in economics , he had no such problem, and could start in a more offhand, self-deprecating way, using even the deadly beginning "This paper": "This paper is concerned with those actions of business firms which have harmful effects on others" (Coase 1960, p. 95). For his exordium Ronald Coase declared that "Economic theory has suffered in the past from a failure to state clearly its assumptions" (Coase 1937, p. 32). He was drawing on the rhetoric ofaxiomatization, the French claim since Descartes that we know what we mean only if we know what axioms we have started with. Such claims were helpful for a young economist even in 1937, and have since become compulsory . Coase acknowledged with a citation to Nicholas Kaldor (among appeals in the paragraph to the authority of five other well-known economists) "a trend in economic theory towards starting analysis with the individual firm and not with the industry" (Coase 1937, p. 32), a tendency pronounced in Hicks's Value and Capital (1939) and brought to perfection as the main method of economics by Paul Samuelson. Assume a maximizing individual self-aware of his constraints and tastes, and proceed. You will then know what you mean. Many econ87 88 The Lawyerly Rhetoric ofCoase's "The Nature of the Firm" omists cannot now understand an argument unless it is expressed axiomatically. But Coase did not in the article or in his later work actually carry out the Cartesian program of his exordium. In the event, his was a British, empirical, and nonmathematical approach, altogether scrappier and less formal. He got into economics, he has said, through courses in "works and factory management" in 1930-1931, "for which I was singularly ill-suited, but what else was there for someone to do who did not know Latin and did not like mathematics?" (Coase 1988b, p. 5; at Coase 1998d, p. 45, he remarks, "fortunately for me, 1932 saw the height of the Depression, there were no jobs in industry, and I went to Dundee [School of Economics and Commerce] and became an economist"). Coase has never been an economist in the Samuelsonian mode, in love with rigor of a mathematical kind. He was as enthusiastic as any young economist in the 1930s about the new apparatus, which "has the advantage that one could cover the blackboard with diagrams [later with equations] and fill the hour in one's lectures without the need to find out anything about what happened in the real world" (Coase 1988c, p. 22). But he outgrew it. When George Stigler started in the 1960s calling his misunderstanding of one of Coase's propositions in the celebrated article of 1960 "Coase's Theorem," Paul Samuelson snorted, "Where's the theorem"? Where is the axiom system from which an ifthen statement can be rigorously derived, the only way of knowing what we mean? Not in "The Problem of Social Cost," nor in "The Nature of the Firm."l Coase also speaks the language of highbrow economic science, establishing an ethos worth believing, when late in the paper he ponderously generalizes: "Other things being equal, therefore, a firm will tend 1. I should mention my longstanding conviction that the misnamed "Coase's Theorem" (it is Smith's or Edgeworth's or Arrow-Debreu's Theorem, misnamed by that fine student of economic thought, George Stigler) is not the point of Coase's article in 1960 (see McCloskey 1985, pp. 335-40; and the full argument in McCloskey 1997b). The article was not meant to show that we live already in the best of all possible worlds (as Stigler was inclined to assume in this and other cases) but, on the contrary, that if we did live in such a world there would of...


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