Coase's masterpiece is two famous papers. One is the Nature of Enterprises published by 1937, which discusses the reasons for the existence of industrial enterprises and the boundaries of their expansion scale in a unique way. Coase created an important category "transaction cost" to explain it. The so-called transaction cost, that is, "the cost of using the price mechanism" or "the cost of trading by means of market exchange", includes the cost of providing the price, the cost of bargaining, the cost of concluding and executing the contract, etc. Coase believes that when the market transaction cost is higher than the internal management and coordination cost of the enterprise, the enterprise comes into being, and the existence of the enterprise is precisely to save the market transaction cost, that is, to replace the high-cost market transaction with the low-cost internal transaction; When the marginal cost of market transaction is equal to the marginal cost of internal management coordination, it is the boundary of enterprise scale expansion. Another famous paper is Social Cost published by 1960. This paper re-studies the characteristics of contractual behavior when the transaction cost is zero, criticizes Pigou's compensation principle (government intervention) on the issue of "externalities", and demonstrates that market transactions are equally effective even if social costs (that is, externalities) appear on the premise of clear property rights. Coase found that once the transaction cost is assumed to be zero and the property right is clearly defined, then the legal norms do not affect the result of the contract behavior, that is, the optimization result remains unchanged. In other words, as long as the transaction cost is zero, no matter who owns property rights, the optimal allocation of resources can be achieved through free market transactions. George stigler, an economist at the University of Chicago (1982 Nobel Prize winner in economics), summarized Coase's thought as "under the condition of perfect competition, private cost equals social cost" and named it Coase Theorem. Coase is regarded as the founder of new institutional economics.
Ronald harry coase is the founder of property right theory. As early as 1937, he expounded some basic concepts of this theory in the article "The Essence of Enterprises" published on the basis of his undergraduate thesis. People should still be surprised at his knowledge at that time. But after this book was written, it didn't get much attention. After nearly 30 years of silence, the theory of property rights has been paid attention to. After 1980s, with the upsurge of laissez-faire, the theory of property rights was highly respected, and Coase won the Nobel Prize in Economics.