The Marginal Cost Controversy, “Teaching What Economic Policy Is Really About”

Abstract What did Coase teach in the classroom? Coase’s articles reprinted in The Firm, the Market, and the Law make up 4 of 11 articles assigned in Coase’s 1972 course on “Economic Analysis and Public Policy.” This article reconstructs Coase’s 1972 syllabus, describes Coase as a teacher, reviews the part of his course devoted to the marginal cost controversy, and presents the lessons learned by a student in Coase’s course. Coase taught practical analysis, useful in law, business, and administration to law students. In addition to teaching the important ideas found in The Firm, the Market, and the Law , Coase taught the controversy surrounding marginal cost pricing. He assigned articles which criticized his views severely. His students learned about strongly opposing views and were expected to decide for themselves what they thought. Thus, Coase taught how discourse on public policy should be conducted. His classroom was a model of the “marketplace for ideas.” A close reading of the assigned materials on the marginal cost controversy reveals the connection Coase made between pricing schemes and economic development, revealing Coase’s view that marginal cost pricing would retard growth. Coase wrote about microeconomic policy decisions with an eye on the macroeconomic consequences. Coase taught that theory should not be allowed to stand in the way of progress.