Abstract
The methodological approaches of Ronald Coase and Richard Posner are compared and contrasted with regard to microeconomic theory and its application to law and economics. The central divide is whether positive transaction cost requires a major reworking of the core of neoclassical price theory (Coase: yes; Posner: no). To provide evidence on this matter, the paper examines Posner’s well-know treatise Economic Analysis of Law and, in particular, his use of two basic price theory tools (downward sloping demand curve; competitive model of demand/supply) for positive and normative analysis of labor markets and labor law. Neither construct is found robust with respect to variation in transaction cost. An alternative positive transaction cost representation of labor demand and wage determination models also reveals that Posner’s conclusions on the efficiency effects of various laws and regulations are not well-grounded. The conclusion, as Coase put forward in his Nobel address, is that core tools of microeconomics are contingent on transaction cost and the institutional structure of production.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
