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3. Coase, R H ‘The Firm, the Market and the Law’ in R H Coase The Firm, the Market and the Law (Chicago: University of Chicago Press, 1988) p 5 Google Scholar. Yet Coase has bitterly complained of hostility from ‘standard economists’: R H Coase ‘The Nature of the Firm: Influence’ in O E Williamson and S G Winter (eds) The Nature of the Firm (Oxford: Oxford University Press, 1991) ch 5.

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5. R H Coase ‘The Problem of Social Cost’ in Coase The Firm, the Market and the Law (above n 3) p 114.

6. Ibid.

7. R H Coase ‘The Nature of the Firm’ in Coase The Firm, the Marker and the Law (above n 3) p 34.

8. Ibid, p 38.

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18. G S Becker ‘Crime and Punishment: An Economic Approach’ in The Essence of Becker (above n 16) ch 19.

19. G S Becker A Treatise on the Family (Cambridge, Mass: Harvard University Press, rev edn, 1991).

20. G S Becker ‘An Economic Analysis of Fertility’ in The Essence of Becker (above n 16) pp 242–243.

21. Becker frequently enters such a reservation, but merely as a prelude to proceeding unabashed with his analyses in exactly the same way. Even his Nobel Lecture begins with a similar hedge: G S Becker ‘The Economic Way of Looking at Behaviour’ in The Essence of Becker (above n 16) p 632.

22. Ibid. p 643.

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27. R A Posner Economic Analysis of Law (Boston: Little, Brown, 4th edn, 1992) p 151.

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37. Eg S Clarke (ed) The State Debate (London: Macmillan, 1991).

38. K J Arrow ‘Pareto Optimality with Costly Transfers’ in K J Arrow Collected Papers vol 2 (Cambridge, Mass: Belknap Press, 1983) p 290.

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43. Arrow ‘Pareto Optimality with Costly Transfers’ (above n 38) p 291.

44. H H Gossen The Laws of Human Relations (Cambridge, Mass: MIT Press, 1983) ch 7; W S Jevons The Theory of Political Economy (Harmondsworth: Penguin Books, 1970) ch 4; C Menger Principles of Economics (New York: New York University Press, 1981) ch 5, s 3 and L Walras Elements of Pure Economics (Philadelphia: Orion Editions, 1983) lesson 3.

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48. R H Coase ‘The Institutional Structure of Production’ in R H Coase Essay on Economics and Economists (above n 4) pp 5–6.

49. Indeed, a survey of the Social Sciences Citation Index (which covers law, economics, and social science journals) of the period 1981–88 showed that this was by far the most cited article published in a law review: R C Ellickson Order Without Law: How Neighbours Settle Disputes (Cambridge, Mass: Harvard University Press, 1991) p 2, n 2.

50. Coase ‘The Problem of Social Cost’ (above n 5) p 114.

51. G J Stigler The Theory of Price (New York: Macmillan, 3rd edn, 1966) p 113. While not denying the ideas behind it, Coase has always been anxious to disavow authorship of the phrase. Stigler said of the Coase Theorem: ‘If this proposition strikes you as incredible on first hearing, join the club. The world of zero transaction costs turns out to be as strange as the physical world would be without friction.’ (G J Stigler ‘The Law and Economics of Public Policy: A Plea to the Scholars’ (1972) 1 J Legal Studies 12. Cf G J Stigler ‘Two Notes on the Coase Theorem’ (1989) 99 Yale LJ 631).

52. Coase ‘The Problem of Social Cost’ (above n 5) pp 115–118.

53. R H Coase ‘Notes on “The Problem of Social Cost’” in Coase The Firm, the Market and the Law (above n 3) p 174.

54. At the Tenth Annual Conference on New Institutional Economics, responding to what Posner had apparently intended to be a eulogistic account of Coase's ideas, Coase commented (R H Coase ‘Coase on Posner on Coase’ (1993) 149 J Institutional and Theoretical Economics 96): ‘My first reaction on reading Posner's paper was one of amusement. It recalled to my mind Miss Elliott's description of Alfred Marshall's lectures on Henry George. She said that Marshall reminded her of a boa-constrictor that slobbered over its victim before swallowing it. In saying this. I had no intention of equating Posner with Marshall, still less with any kind of snake, although I did confess that the wicked thought did flicker through my mind as I studied his paper with more care and ceased to be amused. Posner says that the first part of his paper describes “the conception of the field [the new institutional economics] held by Ronald Coase.” Reading this part of his paper recalled to my mind Horace Walpole's opening remarks in his book on King Richard the Third: “so incompetent has the generality of historians been for the province they have undertaken, that it is almost a question, whether, if the dead of past ages could revive, they would be able to reconnoitre the events of their own times, as transmitted to us by ignorance and misrepresentation.” I have only one foot through the door, but should the final yank come before this piece is published, Horace Walpole's words would apply exactly to Posner's highly inaccurate account of my views.’ Posner nevertheless allowed a paper on which he was then working which sought to expound Coase's views on methodology to be published: R A Posner ‘Nobel Laureate: Ronald Coase and Methodology’ (1993) 7 J Economic Perspectives 195.

55. Coase ‘The Institutional Structure of Production’ (above n 48) p 11.

56. Coase ‘The Firm, the Market and the Law’ (above n 3) pp 23–24. A typical example is pollution caused by a factory, which causes harm to persons who are not party to any of the transactions involved in producing or consuming the factory's products.

57. Coase, ‘The Firm, the Market and the Law’ (above n 3) p 22. Although Coase was extremely hostile to Pigou, his treatment of the latter's ideas seems to us to have been fair, but see, contra, Simpson, A W B ‘Coase v Pigou Reexamined’ (1996) 25 J Legal Studies 53. Coase does not come particularly well out of the subsequent exchange with Simpson, where Coase's usual balance and wit seem to desert him. Coase ‘Law and Economics and A. W. Brian Simpson’ and Simpson, A W B ‘An Addendum’ (1996) 25 J Legal Studies 99.Google Scholar

58. For an exemplary exchange of views, see G Calabresi and A D Melamed ‘Property Rules, Liability Rules and Inalienability: One View of the Cathedral Crypt’ (1972) 85 Harv LR 1089 and P Burrows ‘Nuisance, Legal Rules and Decentralised Decisions: A Different View of the Cathedral Crypt’ in P Burrows and C J Veljanovski (eds) The Economic Approach to Law (London: Butterworths, 1981) ch 6.

59. Surveys are provided by R D Cooter ‘The Coase Theorem’ in Eatwell, J et al (eds) The New Palgrave (London: Palgrave, 1987) pp 457–460 CrossRefGoogle Scholar; G Daly ‘The Coase Theorem: Assumptions, Applications, Ambiguities’ (1974) 12 Economic Inquiry 203 and R O Zerbe ‘The Problem of Social Cost in Retrospect’ (1980) 2 Research in Law and Economics 83.

60. Cooter, R D The Cost of Cease (1982) 11 J Legal Studies 1;C Fried Right and Wrong (Cambridge, Mass: Harvard University Press, 1978) ch 4Google Scholar; D Kennedy ‘Cost-benefit Analysis of Entitlement Problems: A Critique’ (1981) 33 Stanford LR 33; D H Regan ‘The Problem of Social Cost Revisited’ (1972) 15 J Law and Economics 427 and L H Tribe ‘Technology Assessment and the Fourth Discontinuity: The Limits of Instrumental Rationality’ (1973) 46 Southern Calif LR 617.

61. Posner, for example, would apparently largely dispense with antitrust (R A Posner Antitrust Law: An Economic Perspective (Chicago: University of Chicago Press, 1976), with most utility regulation (R A Posner ‘Natural Monopoly and Its Regulation’ (1969) 21 Stanford LR 548) and perhaps with legislation altogether (R A Posner Economic Analysis of Law (above n 27) pp 523–524).

62. Eg G Majone (ed) Deregulation or Re-Regulation. Regulatory Reform in Europe and the United Stares (New York: St Martin's Press, 1990); W Bratton et al (eds) International Regulatory Competition and Coordination (Oxford: Clarendon Press, 1996) and S Picciotto ‘Fragmented States and International Rules of Law’ (1997) 6 Social & Legal Studies 259.

63. Eg D Campbell and P Vincent-Jones (eds) Contract and Economic Organisation (Aldershot: Dartmouth Press, 1996) pt 2.

64. M J Sklar The Corporate Reconstruction of American Capitalism 1890–1916: The Market, Law and Politics (Cambridge: Cambridge University Press, 1988) and J Weinstein The Corporate Ideal in the Liberal State 1900–1918 (Boston: Beacon, 1968). In other leading capitalist countries, the state played a more direct role in that period. In Germany, corporate concentration took place within a formalised framework which included state-supervised cartels, whereas in the UK, the longer history of the centralised state and the greater homogeneity of ruling elites permitted much more informal supervision of business and industry.

65. N Fligstein The Transformation of Corporate Control (Cambridge, Mass: Harvard University Press, 1990).

66. M Moran The Politics of the Financial Services Revolution. The USA, the UK, Japan (London: Macmillan, 1991).

67. This can also be described as reification, in the sense of abstracting from the concrete, then mistaking the abstract for the concrete: Gabel, P ‘Reification in Legal Reasoning’ (1978) 3 Research in Law and Sociology 25–51.Google Scholar

68. World Bank World Development Report 1997: The State in a Changing World (Oxford: Oxford University Press, 1997)Google Scholar.

69. D Campbell ‘What Is Meant By “The Rule of Law” in Asian Company Law Reform?’ in R Tomasic (ed) Asian Company Law (Aldershot: Dartmouth Publishing, forthcoming) and in A Czarnota and A Podgorecki (eds) Hidden Structures of the Law (Onzti: International Institute for the Sociology of Law, forthcoming).

70. For a more detailed discussion of different accounts of legal indeterminacy and their implications for the role of lawyering in the development of regulation, see J McCahery and S Picciotto ‘Creative Lawyering and the Dynamics of Business Regulation’ in Y Dezalay and D Sugarman (eds) Professional Competition and Professional Power. Lawyers, Accountants and the Social Construction of Markets, (London: Routledge, 1995) pp 238–274.

71. Posner, R A The Problems of Jurisprudence (Cambridge, Mass: Harvard University Press, 1990) pp 15–16 Google Scholar.

72. In 1993 a Financial Law Panel was established in London, on the recommendation of the Legal Risk Review Committee set up by the Bank of England, to examine the difficulties caused for London's financial markets by legal uncertainty. This was due to concern caused by the losses to financial institutions following appeals court decisions holding that local authorities were acting outside their powers in engaging in ‘swap’ transactions. The committee also identified other problems of uncertainty in the regulation of dynamic and constantly changing markets (Legal Risk Review Committee, Bank of England Reducing Uncertainty: The Way Forward February 1992 and Legal Risk Review Committee, Bank of England Final Report 29 October 1992).

73. D McBarnet ‘Law, Policy and Legal Avoidance’ (1988) 15 J Law and Society 113; D McBarnet and C Whelan ‘The Elusive Spirit of the Law: Formalism and the Struggle for Legal Control’ (1991) 54 MLR 6 and D McBarnet and C Whelan ‘Creative Compliance and the Defeat of Legal Control’ in K Hawkins (ed) The Human Face of law: Essays in Honour of Donald Harris (Oxford: Clarendon Press, 1997) ch 8.

74. D Campbell ‘The Relational Constitution of Contract and the Limits of “Economics:” Kenneth Arrow on the Social Background of Markets’ ch 12 in S Deakin and J Michie (eds) Contracts, Co-operation and Competition: Studies in Economics, Management and Law (Oxford: Oxford University Press, 1997).

75. R C Ellickson, Order Without Law: How Neighbours Settle Disputes (Cambridge, Mass: Harvard University Press, 1991). An earlier version of the study was published as R C Ellickson ‘Of Coase and Cattle: Dispute Resolution among Neighbours in Shasta County’ (1986) 38 Stanford LR 623.

76. Coase ‘Notes on “The Problem of Social Cost”’ (above n 53) pp 172–173.

77. Posner The Economic Analysis of Law (above n 27) p 54.

78. It is also characteristic that he sees this decision as one taken by a court rather than by a legislature, which might be better equipped to conduct the necessary evaluations.

79. Coase ‘Notes on “The Problem of Social Cost’” (above n 53) p 175–178.

80. The old common law rule that an animal owner is liable for damage caused by trespass was widely reversed in mid-nineteenth-century America by open-range statutes, which specified that a victim could only recover if land was protected by a ‘lawful fence’. But as agriculture developed in the later part of the century, many areas were ‘closed’, which effectively restored the common law rule. In California this culminated in the Estray Act of 1915, which closed all but six counties, one of which was Shasta. In 1945 the California legislature closed part of Shasta by declaring that it was ‘not chiefly devoted to grazing’ and empowered the county's Board of Supervisors to make similar determinations. Consequently, by 1981, 28 areas of the county had been closed in this way (Ellickson Order Without Law: How Neighbows Settle Disputes (above n 75) pp 42–44).

81. Ibid. pp 20–22.

82. In this respect he bears out the point made by Mark Kelman that, in its empirical mode, law and economics can be indistinguishable from ‘law and society’‘impact’ studies: Kelman A Guide to Critical Legal Studies (above n 2) p 117.

83. Ellickson, Order without Law: How Neighbours Settle Disputes (above n 75) p 52. The phrase comes from the well-known article by Robert Mnookin, and Lewis Komhauser, ‘Bargaining in the Shadow of the Law: The Case of Divorce’ (1979) 88 Yale LJ 950.Google Scholar

84. This despite Coase's repeated attacks on Pigou for the same error: Ellickson Order Without Law: How Neighbours Settle Disputes (above n 75) p 281.

85. Ellickson, R C Cf ‘The Case for Coase and against ‘Coaseanism’’ (1989) 99 Yale LJ 611.CrossRefGoogle Scholar

86. Ellickson Order Without Law: How Neighbours Settle Disputes (above n 75) ch 16. In political terms, he sees his study as contributing to the thinking of those such as Hayek ‘who have kept alive the Burkean notion’ of the importance of decentralised social forces in maintaining spontaneous social order: ibid, p 168.

87. Ellickson embarks on his critique of ‘law and society theory’ by citing approvingly an aphorism attributed to Arthur Leff that while law and economics is a desert, law and society is a swamp (ibid, p 147). This one may readily concede, and it may help to explain why Ellickson does not mention the ‘interpretative’ tum in law and society work, although he briefly mentions that his argument is contradicted by interpretivism in anthropology and the humanities (Ellickson Order Without Law: How Neighbours Settle Disputes (above n 75) p 169).

88. Ibid, pp 50–51.

89. Ibid, p 61.

90. Ibid, pp 63–64.

91. Ibid, p 75.

92. Ibid, pp 116ff. He refers to the locus classicus, Joseph Gusfield's account of prohibition ( Gusfield, J R Symbolic Crusade (Urbana: University of Illinois Press, 1963)Google Scholar. The interaction of instrumental and symbolic aspects of a campaign for legislative reform was explored in Carson's socio-legal account of the nineteenth-century struggle over the Factory Acts: W G Carson ‘Symbolic and Instrumental Dimensions of Early English Factory Legislation’ in R Hood (ed) Crime, Criminology and Public Policy (London: Heinemann, 1974) pp 108–120.

93. Eg H S Becker Outsiders (New York: Free Press, rev edn, 1971) ch 7.

94. Thus, recent socio-legal work on regulation has stressed that it should be considered as a ‘responsive’ or ‘reflexive’ process, involving an interaction among the layers of formal and informal regulatory arenas. This at least requires consideration of how to design state or public regulation to interact effectively with informal or private normative practices (eg I Ayres and J Braithwaite Responsive Regulation: Transcending the Deregulation Debate (Oxford: Oxford University Press, 1992). Ellickson also examines this in the later part of Order Without Law (above n 75)). However, it is also important to understand how this interaction operates through an interpretative process involving the construction of authoritative meanings: see eg N Reichman ‘Moving Backstage: Uncovering the Role of Compliance Practices in Shaping Regulatory Policy’ in K Schlegel and D Weisburd (eds) White Collar Crime Reconsidered (Boston: Northeastern University Press, 1992) pp 244–268, esp pp 256ff.

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100. G M Hodgson ‘The Return of Institutional Economics’, in N J Smelser and R Swedberg (eds) The Handbook of Economic Sociology (New York: Princeton University Press, 1994) ch 3.

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111. Coase ‘The Institutional Structure of Production’ (above n 48) p 14.

112. It is, perhaps, sufficient compliment to Coase that one is simply jarred by the contrast between this Readers' Digest talk of galaxies and primordial matter and the carefulness about institutional detail that one identifies with his substantive work. Nevertheless, his notion that a sounder foundation for a theory of markets may be developed from ‘sociobiology’ has been elaborated by others, notably Becker (G S Becker ‘Altruism, Egoism and Genetic Fitness: Economics and Sociobiology’ in Becker The Essence of Becker (above n 16) ch 13). It is now being elevated into a general theory of ‘evolutionary economics’: eg J Hirshleifer ‘Economics from a Biological Point of View’ (1978) 20 J Law and Economics 1. The notion is that, even if not all behaviour is consistent with rational choice, competition and hence natural selection will ensure that those more capable of rational behaviour will survive. This elevates the naturalistic strain which has always been present in political economy into a general theory of ‘biological economics’.

113. J S Coleman, Foundations of Social Theory (Cambridge, Mass: Beknap Press, 1990). Becker's endorsement of this book in the publisher's blurb on its cover is as enthusiastic as one would expect.

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119. Williamson has shown an interest in the ‘old’ institutionalists, while agreeing with a general view that the new institutional economics has had greater influence than the old precisely because it has ‘shunned methodological controversy in favour of operationalisation’ (O E Williamson ‘A Comparison of Alternative Approaches to Economic Organisation’ (1990) 146 J Institutional and Theoretical Economics 64.).

120. Professor Goodhart himself has felt the need to underpin his own approach to monetary and financial economics, which stresses the sluggishness and inertia of markets and hence the importance of money and the role of financial intermediaries and market-makers, with a micro-economic theory which he argues should be based not on a priori assumptions but empirical study of how actual markets work in practice. This was spelled out by the addition of a new first chapter to the second edition of his text Money, Information and Uncertainty (London: Macmillan, 1989), which begins arrestingly, ‘Time is the ultimate constraint on mortals’.

121. H A Simon Administrative Behmviour (New York: Free Press, 3rd edn, 1976).

122. D C North Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990) p 20.

123. This is not merely an abstract theoretical position, but receives extensive corroboration in the historiography of what should be recognised to be the historically distinct capitalist mode of production in which exchange relationships have become the basis of social solidarity (F Braudel Civilisation And Capitalism vol 2 (London: Collins, 1982)). The most compelling sociological understanding of choice by rational, utility maximising individuals which is axiomatically assumed by neo-classical economics is of it as a technical rational orientation of action which has its foundations in the social relations of capitalist production (M Weber Economy And Society (Berkeley: University of California Press, 1978) ch 2). On this capitalist basis, this orientation of action is not self-conscious, and typically has the alienated form of claiming to be (economic) action as such, that is (economic) action without historical limit (K Marx Capital vol 1 (Harmondsworth: Penguin Books, 1976) ch 1, s 4) or restriction on the limit of its application to what really are non-economic spheres of action (K Marx ‘Economic and Philosophical Manuscripts of 1844’ in K Marx and F Engels Collected Works vol 3 (London: Lawrence and Wishart, 1975) pp 322–326).

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