Anthony Trollope Employed His Wake-Up Call. Ronald Coase Would Have Seen Why.

A wake-up call is a small service that people rarely buy fresh each morning. They hire one person, ask a friend, or take it as part of a hotel room, because repeating a purchase every day costs more in effort than the service is worth. That reasoning is borrowed from Ronald Coase’s 1937 argument about why firms exist, and this piece uses it as a lens on wake-up arrangements, not as proof of anything.

What did Trollope’s groom have to do with economics?

In Chapter XV of An Autobiography, Anthony Trollope says an old groom was paid £5 a year extra to wake him and bring coffee to his table by 5:30 a.m. He adds that the man never failed. The full account is in the post on Trollope’s early-morning routine. It is also a small contract.

Consider what Trollope did not do. He did not look for the cheapest available caller each night, haggle over the rate, and check the next day whether the call had come. He paid one annual sum to one man who already lived on the property and already knew which window was his.

Coase put a price on using the market

Ronald Coase, a young lecturer at the London School of Economics, published “The Nature of the Firm” in the journal Economica in 1937. His question sounded naive: if markets allocate resources so well, why do companies exist at all, with managers giving orders instead of prices doing the work?

His answer was that “there is a cost of using the price mechanism.” Somebody has to find out what the going price is, negotiate it, draw up the terms and make sure they are kept. For a one-off purchase that cost is worth paying. For a task that recurs every day, it is often cheaper to settle the terms once and then simply give instructions. That is, roughly, what an employer does.

Applied to mornings, the arithmetic is easy to sketch. A fresh transaction each night would need a caller found, a price agreed and a way to confirm the call was made. A groom at £5 a year needs none of that after the first conversation. Spread over roughly 365 mornings, £5 comes to under four pence a day.

Why does the same logic work for friends and hotels?

A friend who agrees to ring you at 6:30 is cheaper than any service for the same reason. The costs a stranger would bill for (trust, a shared language, knowing your number, noticing if you do not answer) were paid long before. They are shared across all the other things the two of you do for each other.

A hotel bundles the call into the room rate. The front desk does not quote you a separate price, because quoting and billing 2 a.m. requests individually would cost more than the calls themselves. Stranger-to-stranger arrangements, such as the app described in the Wakie teardown, start with none of that shared history, so each caller has to earn trust that a friend already has.

A long-running arrangement trades away flexibility

Coase wrote about factories and firms, so wake-up calls are a loose fit and the comparison stays an illustration. The trade-off it points to is real, though. A groom you cannot easily replace is a groom you cannot swap when he oversleeps, and a friend who agreed once may fail quietly at no cost to either of you. Cheap contracts are cheap partly because nobody checks them.

Coase’s 1960 paper “The Problem of Social Cost” discussed Sturges v. Bridgman, an 1879 English case in which a physician built a consulting room against the wall of a confectioner whose mortar and pestle had been pounding for years. The court ordered the confectioner to stop. Coase used the case to point out that the harm existed only because the two men were next to each other, and that either could have changed. An alarm that wakes the wrong person is a smaller version of that question.

Settle the terms once, and decide who checks

If a wake-up arrangement is going to repeat, set the terms once and spell them out: who calls, by when, and what happens if the call is not answered. Re-negotiating on the night is where most of these deals fail. If the arrangement is with a friend, be honest that the check on whether it happened is the missing piece, and decide in advance who notices. A price that stings only when you miss is one way to supply it; a person who asks the next day is another.