ABSTRACT
The principal focus of law and economics at Chicago under Aaron Director on antitrust and government regulation would change and expand into a dominant analytical approach to all of law. Ronald H. Coase was awarded the Nobel Prize in Economics in 1991, but he was not a trained economist: his undergraduate studies were in law and commerce. Coase does not emphasize the point, but his argument can be put in terms of information. In Coase’s example about the operation of the firm, the manager has differentially superior information about the relative productivity of inputs to production to outweigh the costs of using price information developed through a market process to determine allocation. Coase describes comprehensively that the prevailing approach among economists at the time was to conclude that the government should make up the shortfall between prices set at marginal cost and necessary total revenue where prices would have to equal average cost to sustain the enterprise.
