Ronald Coase, RIP

Sad to hear that the economist Ronald Coase has died.

We shared a birthday, albeit several years apart, and I’m hoping for similar longevity.  He died at 102.

Coase won the Nobel prize for economics for two papers he wrote in 1937 and 1960. The 1960 paper, The Problem of Social Cost, was very influential on the future concept of carbon pricing to deal with global warming.

However, it was the earlier paper that brought me to his work.  The Nature of the Firm was the first paper to explain why business organisations exist, creating an infrastructure to employ people rather than deal with them as individual suppliers of services.  The paper should be essential reading for anyone seeking to understand why today’s world sees a growth in freelancing and the Sovereign Professional.  At the heart of Coase’s argument are transaction costs between firm and individual.  Today’s technology has reduced those costs to a point where freelancing – and the engagement of freelancers – makes sense. 

It’s not all about technology but Coase’s argument for why firms exist also explains why freelancing, interim management and all forms of outsourcing can thrive today.