A world without transaction costs is the economist’s version of a spherical cow. Coase’s goal in describing a transaction-cost-free world was to focus attention on the importance of transaction costs to economic policy. …Economic policy analysts on the political right began treating “zero transaction costs” not as a heroic simplifying assumption, but as a plausible policy goal.
Related: “A farmer has a problem with foxes eating his hens. So he asks his physicist friend to help find a solution. The physicist spends a day thinking, then replies ‘Well, I’ve found a solution, but it will only work for spherical chickens in a vacuum.’”
- Ronald Coase obituary (theguardian.com)
- Ronald Coase, Nobel Winner Who Studied Corporations, Dies at 102 (bloomberg.com)