Steven G. Medema, economics professor at the College of Liberal Arts and Sciences at the University of Colorado Denver, recently was awarded a $104,348 project grant by the Institute for New Economic Thinking (INET) through the Institute's Inaugural Grant Program.
Medema will write a book-length intellectual history of the Coase theorem, one of the most important and controversial ideas to emerge in the post-World War II literature in economics. The Coase theorem has transformed economists' analysis of phenomena known as "externalities" – situations in which the actions of one party have spillover effects on others (e.g., pollution) – by suggesting that these problems can be successfully resolved through the market rather than requiring government intervention.
Through the study, Medema plans to use INET's funding to further the understanding of why the theorem came to captivate the minds of economics and legal scholars and how its impact on economics and law reshaped both the theoretical landscape and legal-economic policymaking, while continuing the argument for the relevance of the study of the history of economic ideas.
"The controversy over the Coase theorem and the theorem's diffusion into economic and legal thinking is a fascinating episode in the history of economic ideas both for its impact on economics and law and because of the insights it provides into how economists go about doing economics," Medema said. "I am very grateful that INET has seen fit to support this research and, more generally, to advocate for the importance of the study of the history of economics as a scholarly field and in the training of economists."
INET's Inaugural Grant Program was created in direct response to arguably the worst economic crisis in world history, and has been designed to encourage and support the new economic thinking required to effect change that will avert future crises. The program was launched in 2010, received more than 500 applications from around the world and has selected 30 initiatives to be awarded grants–totaling $6.75 million. INET's Grant Program will continue with two similar grant cycles annually, the next one commencing in the spring of 2011.