Ronald Coase and Business Understanding (Part I: Why Are There Firms?)

[Editor note: Ronald Coase died last week at age 102 (obits here and here). One of the most important economists of the last century, Coase substituted real-world economics for ‘blackboard economics’ to solve some fundamental questions–and to appreciate market processes in place of government intervention.]

“When economists find that they are unable to analyze what is happening in the real world, they invent an imaginary world which they are capable of handling. It was not a procedure I wanted to follow in the 1930s. It explains why I tried to find the reason for the existence of the firm in factories and offices rather than in the writings of economists, which I irreverently labeled as ‘bilge.’” (Ronald Coase)

MasterResource attempts to comprehend markets and government regulation of markets. Undesigned (market) order is compared and contrasted to imposed (government) disorder.…

The Ratepayer’s Prayer (Brother Clarkson, petitioner and parishioner)

The familiar complaint of market failure by critics of decentralized (nongovernmental) decision-making must be coupled with realistic discussion about any government “solution.” This is why market failure must be considered alongside two other failures:

• Analytic failure, which can range  anywhere from intellectual error to the fatal conceit to emotional bias, and
• Government failure, the gap between theory and practice, wishes and result.

Intellectuals, practitioners, regulators, and the public far too often resort to see-a-problem, pass-a-law rather than:

1. Making sure what is seen as a problem is really negative;
2. Making sure that the undesired situation did not result form prior government involvement in whole or part; and
3. Assessing whether the (coercive) solution is greater than the problem, which would leave civil society (media, foundations, public opinion) to right the wrongs.

Reasons to Sell Enron Wind (October 1998 memo to Ken Lay)

“Wind is almost a pure subsidy play, which means that Enron will be at odds with the market and must continually intervene into the political processes to extend subsides and/or create new ones. This is an expensive process and may trade away what we are lobbying for elsewhere.”

In my last seven (of 16) years at Enron, my title was Director of Public Policy Analysis. In this role, I was Enron’s libertarian, balancing, I suppose, Enron’s Left environmentalist John Palmisano, author of the infamous Kyoto memo of December 1997.

Enron had multiple profit centers around the global warming issue, which made my internal case for rejecting climate alarmism/policy activism an uphill one. But I got my licks in, including with some ‘e-mail wars’ with Palmisano. I have written numerous posts at MasterResource on Enron’s rent-seeking business strategy and will further set the historical record straight with a forthcoming book in Enron-inspired trilogy.…

19th Century Frac Job: Oil Well Torpedoing (and a ‘grievous’ government monopoly)

Milton Friedman on the Energy Crisis (and ObamaCare to come)

Energy Tax Preferences: Rid Them All (Cato letter to House working group revisited)

Is the Carbon Tax Seance Over? (A reality check for a trumped-up ‘conservative’ cause)

Global Warming is Responsible for ….

Useful Learning, Real Money: A Glimpse Into the Hydrocarbon Educational Future

‘The Greening of Planet Earth’ (the 1992 video, updated in 1998, needs another update)