Medema, Steven wrote:
>  (Why? I am tracing the diffusion of the Coase 
> theorem in the textbook literature, and I want 
> to get at not only how the various books 
> treated­or did not treat­the theorem, but how 
> it was treated in the most popular books and 
> thus was presented, in writing at least, to the largest body of students.)


Steven, I wonder if the Coase theorem ever did 
get diffused. Perhaps it would be more accurate 
to say that it was CONfused. The treatment in 
McConnell and Brue's principles text, which is 
the last book I used, seemed almost ridiculous 
compared with the message that I believe Coase 
really wanted to send. To receive the true 
THEORETICAL message, it seems to me that a 
student must first learn about entrepreneurs. She 
must learn how entrepreneurs function (a) to 
eliminate differences between prices and 
opportunity costs and (b) to invent new economic 
relationships to deal with new externality 
situations. To receive the DOCTRINAL message, a 
student must at least know, if not be 
indoctrinated into, Pigouvian public policy 
analysis. Remember it took a couple of intense 
Coase-to-person sessions for Coase to teach this 
message to the highly motivated and best U. of 
Chicago professors. It might be wrong to think 
that mediocre economists who write textbooks 
could help a set of mediocre teachers teach such 
a theorem to, I hesitate to say it, mediocre students.

The essence of the Coase Theorem, as I understand 
it, is the relationship he identified between 
between private property rights and 
entrepreneurship. This is a subject -- or, more 
correctly, a combination of subjects -- that do 
not fit well into textbooks and that must be 
learned in ways that are quite different from 
those practiced in most universities today.

The problem here may be one of mislabeling, like 
your posting. Perhaps the Coase theorem should be 
labeled the Coase paradigm. Or perhaps the Coase 
theorem should be subsumed under broader subjects 
such as the theory of property rights and early neoclassical economics.

Which, by the way, takes us partly back to Knight 
and what economists did not learn from him (but 
later had to learn from Coase). As you know, 
Knight had a substantial influence on Coase and 
he also had written some things about property 
that sound very "Coasean." It did not take long 
for Knight to be forgotten by the non-HOTers. 
Perhaps if someone had had the foresight to 
promote a KNIGHT THEOREM,  fashionable textbook 
writers would have been compelled to write about 
it and he would have been remembered. Even by the Italians.

Pat Gunning