Posner on Institutions and Organizations, Round Two
| Peter Klein |
Remember the infamous Posner-Coase-Williamson exchange from JITE, 1993? Posner dismissed the New Institutional Economics as a derivative form of Posnerian law and economics, prompting unhappy replies from Coase and Williamson. Here’s Coase:
Posner [1993, 79] says that the first part of his paper describes “the conception of the field [the new institutional economics] held by Ronald Coase.” Reading this part of his paper recalled to my mind Horace Walpole’s opening remarks in his book on King Richard the Third: “So incompetent has the generality of historians been for the province that they have undertaken, that it is almost a question, whether, if the dead of past ages could revive, they would be able to reconnoitre the events of their own times, as transmitted to us by ignorance and misrepresentation” (Walpole [1768, 1]). I have only one foot through the door but should the final yank come before this piece is published, Horace Walpole’s words would apply exactly to Posner’s highly inaccurate account of my views.
Adds Williamson, wryly: “Richard Posner is a prolific writer and distinguished jurist. He is frequently asked to speak with wisdom and authority on many issues. Whether he hits the mark or misses varies with his depth of knowledge and understanding of those issues. . . . I content that Posner’s  commentary mainly misses.”
Now Geoff Hodgson has produced a reboot: a long essay by Posner in the Journal of Institutional Economics titled “From the New Institutional Economics to Organization Economics: with Applications to Corporate Governance, Government Agencies, and Legal Institutions,” with replies from Jürgen Backhaus, Bruno Frey, Lin Ostrom, John Roberts, Tom Ulen, and several others (but not Coase or Williamson!). Posner focuses almost exclusively on the principal-agent problem, perhaps unaware that information, delegation, coordination, and adaptation are also important issues in organizational economics. His main conclusion seems to be that both private firms and public agencies are equally inefficient. Interesting reading, to be sure (and much better than Posner’s solipsistic essay on his conversion to Keynesianism, inexplicably published by the New Republic).