In Search of Santa Claus: Samuelson, Stigler, and Coase Theorem Worlds

Abstract

Paul Samuelson was fond of labeling mathematical models with extremely strong and empirically unrealistic assumptions, "Santa Claus" economics. But there was one economic result that, in Samuelson’s view, could not be captured even in a Santa Claus world: the Coase theorem, an object of his repeated derision. His friend George Stigler, though, had no such problems and, indeed, was perhaps the biggest cheerleader for the theorem. This paper examines their respective treatments of the Coase theorem in an effort to explain their contrasting positions. In doing so, it suggests that their views on appropriate degrees of abstraction--and perhaps the limits of their theoretical imaginations--were conditioned in part by the results to which that abstraction led.