Economics Seminar (Theory): Robert Gibbons, Massachusetts Institute of Technology

Robert Gibbons, Sloan Distinguished Professor of Management, Sloan School of Management and Professor of Organizational Economics, Department of Economics, MIT

From Coase to culture: Visible Hands Build Equilibria
(No paper for this talk)

Abstract

This essay, originally delivered as the 2022 Economica-Coase lecture at the LSE, offers three reasons why Coase’s (1937) classic distinction between firms and markets should be gracefully retired, having been duly celebrated for its field-launching contribution to organizational economics. Since the reasons (involving the academic past, the economic present, and the managerial future) motivate retiring something Coase famously said, it may be surprising that one of the main points of the essay is that Coase also said other things (less famously) that are consistent with all three reasons. In this sense, the essay offers an updated appreciation of Coase’s seminal paper.

Building from the updated appreciation, I sketch a possible future for organizational economics, in two respects. First, related to the “economic present” reason, I hope for a reweighting of research activity towards economic interactions that are organized but not within a single organization. Second, related to the “managerial future” reason, I hope for a reconception of Coase’s “conscious power” of the entrepreneur, more in keeping with the coalitional views of Barnard, Simon, and Cyert & March.

Importantly, this coalitional view of management (i.e., of what visible hands do) applies to the management of economic interactions not only within organizations but also between them. In fact, studying interactions between organizations may give us fresh insight into the management of coalitions within organizations. For example, both within organizations and between them, the parties may need to build an equilibrium. I close the essay with highly preliminary speculations about (a) possible connections between building an equilibrium and building a culture and (b) current and potential models of such things.