On Fri, Dec 26, 2025 at 01:48 PM, Tom Walker wrote: > > Like perfect competition, perfect information, and zero transaction costs? > Who needs abstraction when you have those abstractions?
Actually, he was skeptical of the ways that most mainstream economists made of those ideas. He himself said that zero transaction costs do not actually exist and so are never observed. He used the notion of zero transaction costs to expose inadequancies in standard welfare economics. As he put in The Problem of Social Cost (1960): > > > > > *“In order to carry out a market transaction it is necessary to discover > who it is that one wishes to deal with, to inform people that one wishes > to deal and on what terms, to conduct negotiations leading up to a > bargain, to draw up the contract, to undertake the inspection needed to > make sure that the terms of the contract are being observed, and so on.”* > > The zero-cost case was intended to be a reductio ad absurdum. If Pigouvian conclusions fail under zero transaction costs then the theory is flawed. He was also skeptical of notions like perfect information. As he put it in his Nobel lecture: > > > > > *“The costs of discovering prices, negotiating and concluding contracts, > and monitoring and enforcing them are real and important.”* > > If perfect information could exist then many of the costs that he described would not exist either and then there would be no reason for contraxts, law or firms to exist. So for Coase, perfect information is not a terribly useful approximation and if it could be a useful approximation, it would eliminatethe very phenomena that economists need to explain. And Coase was especially skeptical of the value of the notion of perfect competition. In The Firm, the Market, and the Law, he said: > > > > > *“The concept of perfect competition has been of little use in the study > of the real economy.”* > > Using the concept of perfect competition in economic analysis, requires that we assume price discovery to be costless, that the entrance and exit of firms from a market to be frictionless and this notion abstracts from organization and law. For Coase, markets were "structured" not perfect, not even approximately perfect. In short, For Coase, perfect competition, perfect information, and zero transaction costs were not ideal states to be approximated, but unreal fictions whose routine use blinds economists to the institutional structure that makes economic life possible. -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. View/Reply Online (#39877): https://groups.io/g/marxmail/message/39877 Mute This Topic: https://groups.io/mt/116944738/21656 -=-=- POSTING RULES & NOTES #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. #4 Do not exceed five posts a day. -=-=- Group Owner: [email protected] Unsubscribe: https://groups.io/g/marxmail/leave/13617172/21656/1316126222/xyzzy [[email protected]] -=-=-=-=-=-=-=-=-=-=-=-
