An Institution-Theoretic Approach to Unpacking Transactions Costs
32 Pages Posted: 27 Oct 2017
Date Written: October 26, 2017
Taking Coase as our impetus we discuss a tractable environment of transactions costs based on key institutional features that highlight the interaction between a polity and an economy in determining the rights over resources that are used in the production of goods. The setup allows us to consider that part of resources and goods that are a function of transaction costs, and which, in turn, vary by institutional features and regulatory behavior. First, we outline four friction costs that are analogous to Coase's transactions costs except that at the more fundamental level of the economy-cum-polity. Next we adumbrate the consequences of these costs on the economy, and how the structure of the institutional regime affects these costs and the implemented rights; in so doing, we construct metrics to evaluate institutional regimes. Lastly, we show how the institution-theoretic approach facilitates a different viewpoint to innovation and propose some possible extensions.
Keywords: coase, transaction costs, institutions, property rights, resources, friction costs
JEL Classification: D23, D08, H10, L23
Suggested Citation: Suggested Citation