Coase and the Scottish Political Economy Tradition

Coase’s work took a different approach to that of standard economics and he made a series of reflections over the years setting out his methodological views. He first employed this approach in his path-breaking paper on ‘The Nature of the Firm’, which was drafted while in his first academic post, at the Dundee School of Economics and Commerce. The distinctive Scottish political economy approach still dominated economics in Scotland at the time, although the Dundee School stood apart from it. The purpose of this paper is to consider how far Coase was influenced by being in Dundee, and in particular by the Scottish political economy tradition. We find little evidence of influence from the Scottish tradition while Coase was at Dundee. Nevertheless we identify many features of Coase’s methodology which accord with the Scottish tradition. In particular we draw out the similarities with Adam Smith’s approach, which Coase had encountered before coming to Dundee. We conclude that there was a missed connection with the Scottish tradition as it had continued in Scotland into the twentieth century.