The Coase theorem is one of the most significant ideas to emerge in the post-WWII history of economics, its influence touching virtually every subfield of the discipline and myriad areas of legal analysis. The theorem’s validity, though, has been the subject of controversy for some five decades in spite of its now-requisite presence in the economics textbook literature going all the way down to the principles level. It has been probed, prodded, poked, mathematized, demathematized, empirically tested, experimented with, and set in a range of modeling contexts that is mind-bogglingly diverse. It has been assailed by scholars on the left as the height of free-market ideology and by scholars on the right as dangerously interventionist. It has formed the basis for exchange- and market-based policies for dealing with environmental and natural resource problems and is the philosophical cornerstone of the move to define legal justice in efficiency terms. It is also an idea that is notoriously difficult to pin down: there are literally dozens of statements of the theorem in the literature, varying widely in assumptions, contexts, and conclusions. It has been labeled both false and a tautology. In short, it is a most unusual ‘theorem.’

A Google Scholar search of the term “Coase theorem” returns some 17,000 results, and even the far more limited reach of JSTOR returns more than 2,400. The sheer volume of Coase theorem literature makes it difficult to even contemplate the preparation of a work that attempts to capture the place of the theorem in economic and legal analysis, but this is precisely the task taken on by Richard Posner and Francseco Parisi in their two-volume collection, The Coase Theorem. The collection reprints fifty-five of the most significant articles from the Coase theorem literature, doing so with a view to presenting “a selection of the papers that have contributed to the theoretical development of the Coase theorem” and “that illustrate its vast range of applications” (p. x).

The first volume, Origins, Restatements and Extensions, opens with three pieces by Coase himself: “The Federal Communications Commission,” in which the negotiation result that now goes by the name ‘Coase theorem’ was originally stated; “The Problem of Social Cost,” which (among other things) gave this result full voice; and “Notes on the Problem of Social Cost,” in which Coase provides a retrospective view (circa 1988) of his 1960 article, the Coase theorem phenomenon, and the reception accorded his article. A series of eight positive restatements and normative extensions of Coase’s result follow, the former including George Stigler’s original written codification of a ‘Coase theorem.’ Another six articles examining (or juxtaposing) the Coase of the Coase theorem and the Coase of the other thirty-plus pages of “The Problem of Social Cost,” and six more dealing with the legacy of the theorem in economics and law, round out this volume. (Disclaimer: Volume I includes an article by the present reviewer).

Volume II takes up Criticisms and Applications, opening with several well-known surveys of the Coase theorem literature and a set of three case studies that probe the extent to which the theorem’s predictions regarding the invariant effects of alternative legal rules manifest themselves in real-world situations. Two sets of articles on the Coase theorem and governance issues follow, one focused on constitutions and the other on political markets. The reader is then treated to a series of thirteen articles that have featured prominently in the long-running controversy over the theorem’s validity, including a set of six from the debate over whether the theorem holds in the long run, when the possibility of entry is taken into account. This debate illustrates, perhaps better than any of the other strands of the Coase theorem controversy, the wide range of ways in which authors have modeled the Coase theorem and the considerable ambiguity about the theorem to which these alternative modeling strategies have given rise. Volume II concludes with a set of six articles that present and discuss the results of various experimental tests of the Coase theorem’s predictions—including the significant challenge to the theorem posed by findings from the realm of behavioral economics.

For those well-versed in the Coase theorem literature, this collection includes many of the usual suspects, while for those who are relatively unfamiliar with the broad contours of the Coase theorem’s history, the collection provides an excellent overview of the major issues in play and some of the significant directions in which the Coase theorem literature has moved. The 1970s and 1980s were the heyday of Coase theorem scholarship, and this period is very well represented here. But so, too, are the early discussions of Coase’s result, from the 1960s, and the editors have not neglected important contributions from the last decade or so. Moreover, the editors have included a sufficient number of articles under each of their chosen themes to give the reader a well-rounded perspective on the issues in play within those particular strands of Coase theorem scholarship. The reader not already steeped in this literature will come away with a greatly heightened understanding of, and insight into, how vast the theorem’s influence has been, the depths to which scholars have probed its underpinnings, and the range of uses to which the theorem has been put.

That said, the collection also omits any number of pieces that figure prominently in Coase theorem history—perhaps the most glaring omission being David Starrett’s “Fundamental Nonconvexities in the Theory of Externalities” (Starrett Reference Starrett1972), an article that eventually prompted the editors of the Journal of Economic Theory to declare (wrongly, as it turns out) the death of the Coase theorem. Also notably absent is any reference to the ideological cloud hovering over the discussions of the Coase theorem, particularly during the period 1970 to 1985, when the critics on the legal left were attempting to lay waste to the Coase theorem and to the economic analysis of law generally, and environmental economists were recoiling from visions of ‘victims’ bribing polluters to induce abatement.

But it would be exceedingly uncharitable to focus on omissions when the editors are dealing with a literature as vast as that associated with the Coase theorem. Any collection on this topic, unless it runs to at least a half-dozen thick volumes, can only scratch the surface and is bound both to exclude many important and interesting articles and to reflect the particular tastes and preferences of the editor(s). Thus, for example, where the present volumes include a healthy dose of material probing the extension of the Coase theorem to the political realm (a point of emphasis in Parisi’s scholarship), another team of editors might have included instead a set of articles examining the application of the theorem to environmental and natural resource problems or to the law and economics of the family, torts, or corporations. In short, it is much easier to pick apart a collection such as this than it is to assemble it.

If the collection has a significant shortcoming, it lies in the editors’ decision to include only an extremely minimalist introduction rather than one that provides the reader with their views on Coase theorem history, the place of the Coase theorem in contemporary legal and economic analysis, and the insights gained and conclusions drawn after assembling this particular collection of articles from so vast a literature. Given Posner’s pioneering contributions to, and influence on, the development of the economic analysis of law—and thus, by extension, the diffusion of the Coase theorem—as well as Parisi’s many important contributions to Coase theorem scholarship and to law and economics generally, this reader, at least, feels let down by the absence of a lengthy statement of the editors’ take on this literature and on the larger Coase theorem phenomenon. The editors might well respond that their selections speak for themselves on this score, but the historian of economics and law, at least, is left wanting more.

For those eager to learn more about the phenomenon that is the Coase theorem, this collection makes an excellent resource, one that exposes the reader to both the grand themes of Coase theorem history and the theoretical minutia that all too often dominated the discussion—but without going overboard on the latter front. What may surprise the reader unfamiliar with the details of the scholarly treatments of the theorem is the unsettled nature of the discussion: the theoretical and experimental conclusions pro and con and, even more important, the variety of conceptions of, definitions of, content ascribed to, and meanings attributed to the Coase theorem. It is, as noted above, a most unusual ‘theorem,’ and it is the nature of the treatments and use made of the theorem, as much as its influence, that makes the Coase theorem one of the most fascinating ideas in post-WWII economic and legal analysis.