How did Coase study economic institutions?
I found it most illuminating to look at the actual institutions as they exist. Rather than starting with abstract models, I preferred to examine real-world phenomena, often drawing on historical records and legal cases. My approach was to observe how economic activities were organized, identify the frictions or costs involved in these arrangements – particularly transaction costs – and then infer the underlying economic principles that explained their existence and persistence. The lighthouse, for instance, provided a fascinating case study.
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