From Coase to culture? Visible Hands Build Equilibria

Abstract This essay proposes that the classic distinction in Ronald Coase's 1937 paper ‘The nature of the firm’ ( Economica , vol. 4, pp. 386–405) between firms and markets be gracefully retired, having been duly celebrated for its field‐launching contribution to organizational economics. Some of the reasons for retiring this famous distinction rely on other insights from that seminal paper. In this sense, this essay offers an updated appreciation of Coase's paper. In addition, escaping this classic distinction motivates two agendas for organizational economics: (i) a redoubling of research on economic interactions that are organized but not within a single organization; and (ii) a ‘coalitional’ reconception of Coase's ‘conscious power’ of the entrepreneur that applies to the management of economic interactions not only within organizations but also between them. Both agendas seem likely to require new thinking about how parties build equilibria, so I close the essay by suggesting topics from the analysis of organizational culture that might inspire models of building equilibria.