Review of “The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas”

Chapter 7, “The Coase Theorem and the Evolution of Law and Economics,
explores the law and economics movement which evolved out of the work of Coase.
Medema presents law and economics as an “accidental byproduct of Coase's analysis”
(190), the economic imperialism that accompanied it, and the Chicago school approach of
Becker and Stigler. The book concludes with a short epilog “Everywhere, Self-Interest?”
which argues the pendulum of views on the relationship between self-interest, market and
state swings back and forth, and can be expected to continue swinging in the future.

Assessment

As should clear from what I have written, there is much that I admire in this book.
I think the story Medema tells about Classical economists carefully limiting theoretical
claims for the market is absolutely correct. I also agree with his presentation of Coase as
being a much larger critique of welfare economics than what is found in the Coase
theorem. I also find his presentation of public choice as insightful. My only complaint is
that the two different subjects he addresses do not quite fit together for me. Public and
social choice is outside the Pigovian tradition, and the movement to it seemed jarring. By
focusing on that tradition, central parts of the Pigovian tradition story do not get
mentioned. These include the work leading to the textbook Pigovian legacy (such as
Abba Lerner’s Economics of Control and the socialist calculation debate of which that
was a part), and the development of macroeconomics that created a whole new
foundation for government policy analysis. Neither of these get a mention in the book,
even though, in my view, they played a central role in the evolution of thinking about
government policy and fit more closely with the theme in the first four chapters than does
public and social choice. That complaint notwithstanding, I strongly encourage anyone

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