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Transaction Cost Economics: The Natural Progression

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Abstract:

The research program on which I and others have been working has been variously described as the "economics of governance," the "economics of organization," and "transaction cost economics." As discussed in Section I, governance is the overarching concept and transaction cost economics is the means by which to breathe operational content into governance and organization. The specific issue that drew me into this research project was the puzzle posed by Ronald Coase in 1937: What efficiency factors determine when a firm produces a good or service to its own needs rather than outsource? As described in Section II, my 1971 paper on "The Vertical Integration of Production" made headway with this issue and invited follow-on research that would eventually come to be referred to as transaction cost economics. The rudiments of transaction cost economics are set out in Section III. Puzzles and challenges that arose and would require "pushing the logic of efficient governance to completion" are examined briefly in Section IV. Concluding remarks follow.

Document Type: Research Article

DOI: http://dx.doi.org/10.1257/aer.100.3.673

Publication date: June 1, 2010

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