Ronald Coase and the Methodology of Economics

Sam Peltzman

Journal of Law and Economics, 2011, vol. 54, issue S4, S15 - S29

Abstract: Ronald Coase was skeptical that economics is a positive science in the sense made famous by Milton Friedman. According to Coase, that notion is inaccurate on two counts: economists accept much theory without bothering to test it empirically, and much of their empirical work does not test theory. Coase's view is that we seek (and find) truth in economics via a competition of ideas that uses an eclectic variety of methods. I argue that, as a description of what empirical economics is about, much of Coase's critique is valid, even understated. However, I contend that Coase failed to appreciate some of the costs and benefits implied by his critique. For example, by pretending to be a positive science, economics gains a certain rigor that is useful. But it pays for this rigor with a narrowness of scope. On the other side, I argue that progress is hindered by the easy acceptance of nonscientific evaluations of competing theories.

Date: 2011
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