Ronald Coase’s Contribution to Law and Economics

Abstract

Self-interested profit maximisation was assumed to be a reliable predictor of motivating factors of human endeavor, including human behaviour in law. At the dawn of this new economic theory, first proposed in late 60s it continues to create ripples in the legal as well the business circuits. Mostly important, it formed a base for establishing a theoretical justification for limiting the growth of modern socialistic state with regulated economies. Coase’s work has been interpreted by other law and economic scholars as laying for a new instrumental form of normative jurisprudence - a jurisprudence of wealth maximisation, interpreting itself into an intellectual support to the growth of capitalism. Coase believed that in a market economy the main objective of the legal system should be minimising the transactional costs and reducing governmental intervention. He wanted the legal world to understand the economic after-effects of a law and find legal reforms to enhance the overall social productivity. He believed that law could not be separated from the logic of markets. It acted as a redeemer of private rights, which helped in creating a new society. The management of scarce resources is depended upon whether significant reductions in transaction costs backed by a legal arrangement are present. We need to respond to the reciprocal relationship between the legal rules and cultural context. As traditional forces failed to link law and society successfully, Coase gave world a formula to not to analyse law as an autonomous object separate form culture. A representational mode for understanding the relation between law and society was needed-a new understanding of the dialectic theory of law and society. The appeal element of Coase’s article was that he was wise enough think ahead of time by offering new strategies for dealing with the technocratic and social changes of the modern bureaucratic change.