Via a law-and-econ email list that I subscribe to, I came across this marvelous interview that my friend Tom Hazlett did with Ronald Coase back in 1997. Some choice quotes:

Economics has been becoming more and more abstract, less and less related to what goes on in the real world. In fact, economists have devoted themselves to studying imaginary systems, and they don't distinguish between the imaginary system and the real world. That's what modern economics has been and continues to be. All the prestige goes to people who produce the most abstract results about an economic system that doesn't exist.

And this:

TH: Can you give us an example of what you consider to be a good regulation and then an example of what you consider to be a not-so-good regulation?

RC: This is a very interesting question because one can't give an answer to it. When I was editor of The Journal of Law and Economics, we published a whole series of studies of regulation and its effects. Almost all the studies - perhaps all the studies - suggested that the results of regulation had been bad, that the prices were higher, that the product was worse adapted to the needs of consumers, than it otherwise would have been. I was not willing to accept the view that all regulation was bound to produce these results. Therefore, what was my explanation for the results we had? I argued that the most probable explanation was that the government now operates on such a massive scale that it had reached the stage of what economists call negative marginal returns. Anything additional it does, it messes up. But that doesn't mean that if we reduce the size of government considerably, we wouldn't find then that there were some activities it did well. Until we reduce the size of government, we won't know what they are.

TH: What's an example of bad regulation?

RC: I can't remember one that's good. Regulation of transport, regulation of agriculture - agriculture is a, zoning is z. You know, you go from a to z, they are all bad. There were so many studies, and the result was quite universal: the effects were bad.

And this one, which discusses one of my very favorite Coase articles of all time (though one that seems to be little noticed):

TH: What about your article on the market for goods and the market for ideas in the American Economic Review in 1974? You created quite a stir with this and were interviewed by Time magazine. What did you say in that article, and why was it so controversial?

RC: It was controversial because I said that the arguments for regulation of the market for goods and the regulation of the market for ideas are essentially the same, except that they're perhaps stronger in the area of ideas if you assume consumer ignorance. It's easier for people to discover that they have a bad can of peaches than it is for them to discover that they have a bad idea.

TH: So if you think that the consumer, ignorant as he is, ought to be protected by a government regulator, then you should really believe that the government regulator ought to step in and police the speech of professors or politicians or pundits.

RC: That's right. If the government is competent to do the one, it's competent to do the other.

TH: Then there ought to be a federal philosophy commission.

RC: That's right. The press was horrified by the idea. If the argument is exactly the same for regulating the press as for regulating peaches, this meant that I was arguing for regulation of the press.

TH: You have to be careful with reductio ad absurdum arguments.

RC: As they assumed that all regulation in the market for goods was fine, it never struck them that the argument was really the other way around.