Ronald Coase's 1937 paper addressed existential questions on nature of the firm. Coase -- died aged 102 in 2013 -- was then 27 years old and had the brilliance and Chutzpa to ask and answer a fundamental question -- why companies exist? In what ways are firms better ways of organising production and exchange than markets? The answer he concludes lies in what we now term Transaction Costs -- the costs of going to the market. He wrote about 'the cost of organising an extra transaction' (Coase, 1937:p396) versus 'the costs involved in leaving the transaction to be "organised" by the price mechanism.' (Coase, 1937:p404). He called them Marketing Costs, but this was 1937 and he didn't mean 'marketing' as we do. Namely, the costs of searching for information about products, prices, vendors. Yes, information again. Transaction costs include also the costs of bargaining, contracting, etc.
This paper has had immense impact in the field of Economics. However Coase waited more than 60 years for the ultimate recognition. You should watch his 2003 Coase Lecture. You would not expect a lecture by a very old professor of Economics to be funny, but it is.
Some questions to think about:
Q: Would Coase have argued that a postal service should or should not be 'bundled' with for-profit goods and services such as banking or insurance, and competing where the markets and industry can easily provide them instead?
A: Should also unbundle the infrastructure paid for by citizens before selling off bits that the state gives unfair advantage to (semi-state monopoly co's). You can be sure that industry doesn't really want to operate a universal postal service unless it gets handsome subsidies.
