The Institute for New Economic Thinking (INET) announced that it has selected Economics Professor Steven G. Medema, PhD, at the College of Liberal Arts & Sciences at University of Colorado Denver to be awarded a $104,348 project grant through the Institute’s Inaugural Grant Program. Medema will write a book-length intellectual history of the Coase theorem, one of the most important and controversial ideas to emerge in the post-World War II literature in economics.
The Coase theorem has transformed economists’ analysis of phenomena known as “externalities” – situations in which the actions of one party have spillover effects on others (e.g., pollution) – by suggesting that these problems can be successfully resolved through the market rather than requiring government intervention. Many economics and legal scholars have been very preoccupied with this theorem, which has not ever been proven, and seems so obviously unrealistic. Through the study, Medema plans to use INET’s funding to further the understanding of why the theorem came to captivate the minds of economics and legal scholars and how its impact on economics and law reshaped both the theoretical landscape and legal-economic policymaking, while continuing the argument for the relevance of the study of the history of economic ideas.
“The controversy over the Coase theorem and the theorem’s diffusion into economic and legal thinking is a fascinating episode in the history of economic ideas both for its impact on economics and law and because of the insights it provides into how economists go about doing economics,” said Medema. “I am very grateful that INET has seen fit to support this research and, more generally, to advocate for the importance of the study of the history of economics as a scholarly field and in the training of economists.”
“In economics and study of market imperfections, one of great innovations and great challenges to thinking had been the Coase theorem,” said Robert Johnson, PhD, executive director of INET. “It has had an enormous impact on the discipline of law and economics. Steven Medema received the grant to examine the Coase theorem, its shortcomings, its strengths and many ways it has had an impact on the society. I think this is a very important thing to examine in great depth at a time when climate crisis, financial spillovers, and in other words what economists would call externalities have come to the fore.”
Medema’s research focuses most heavily but not exclusively on the post-WWII history of economics, with particular attention to economists’ views of the roles of market and state in economic activity and the extension of economic analysis beyond its traditional boundaries (“economics imperialism”). He served as editor of the Journal of the History of Economic Thought from 1998-2008 and was President of the History of Economics Society in 2009-10. His latest book, The Hesitant Hand: Taming Self- Interest in the History of Economic Ideas, was published by Princeton in 2009.
INET’s Inaugural Grant Program was created in direct response to arguably the worst economic crisis in world history, and has been designed to encourage and support the new economic thinking required to effect change that will avert future crises. The program was launched in 2010, received more than 500 applications from around the world and has selected 30 initiatives to be awarded grants— totaling $7 million. INET’s Grant Program will continue with two similar grant cycles annually, the next one commencing in the spring of 2011.
About the Institute for New Economic Thinking
Launched in October 2009 with a $50 million pledge from George Soros, the Institute for New Economic Thinking promotes changes in economic theory and practice through conferences, grants and education initiatives. The Institute embraces the professional responsibility to think beyond the inadequate methods and models of the world’s financial infrastructures and will support the creation of new paradigms in the understanding of economic processes. For more information, please visit http://www.ineteconomics.org/.