Transaction Cost Economics: How It Works; Where It is Headed
The transaction cost economics program that is described herein is the product of two recent and complementary fields of economic research. The first one is the New Institutional Economics; the second one has been described as the ‘new economics of organization’ ~Moe ~1984, 1990!!. A key conceptual move for both was to push beyond the theory of the firm as a production function ~which is a technological construction! into a theory of the firm as a governance structure ~which is an organizational construction!. Work in both of these areas began to take shape in a concerted way in the 1970s and has grown exponentially since. The economics of organization is the more theoretical of the two and more closely relates to public policy issues traditionally associated with the field of industrial organization. The New Institu-tional Economics is more interdisciplinary and has applications to the contiguous social sciences. Although transaction cost economics has a broad reach – any issue that arises as or can be reformulated as a contracting problem is usefully examined through