Coase theorem

Ronald Coase, Nobel laureate in economics in 1991, publishes "The Nature of the Firm" in 1937 and "The Problem of Social Cost" in 1960. The first paper explains the boundaries of the firm by transaction costs; the second shows that without them the initial allocation of rights does not change the outcome, working from an English case of 1879, Sturges v Bridgman, in which a confectioner and a doctor next door fight over the noise of a mortar. When the costs of internalizing an activity (internal coordination, management, risks linked to specific assets, bureaucracy) exceed market costs for the same activity (negotiation, contracting, supplier failure risk), it is rational to outsource. In the reverse direction, the firm internalizes to avoid market frictions. In the context of agentic AI, Coase's thesis regains direct and radical relevance: the emergence of foundation models capable of performing complex cognitive tasks at near-zero marginal cost transforms the cost profile of many intellectual functions. Activities that once required dozens of full-time equivalents, from financial analysis to contract drafting and code auditing, can now be purchased on the market at the cost of a subscription or an API call. This transformation shifts the make-vs-buy equilibrium toward more outsourcing, but also creates a concentration risk: if all firms buy the same intelligence from the same model providers, diversification disappears and algorithmic monoculture creates systemic vulnerabilities that classical Coasian theory had not anticipated.