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Protection costs, transaction costs,and economic theory

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  • Vahabi, Mehrdad

Abstract

Contractual reductionism takes market exchange as the ubiquitous form of economic organization throughout history. Transactions costs are accordingly regarded as the costs of running any economic system in general. This paper explores the nature of protection/aggression costs as specific costs of coordination through coercion which should be distinguished from transaction costs. Protection/aggression costs play a crucial role in deciding the frontiers between the state and firms as well as their alliance and networking. Our study shows that externalization or internalization of the state-type activities of the enterprise hinges upon the amount of protection/aggression costs compared to the sum total of tax plus transaction costs.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17648.

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Date of creation: Sep 2008
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Handle: RePEc:pra:mprapa:17648

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Keywords: Protection/aggression costs; Transaction costs; Contractual reductionism; Coordination through coercion; external and internal enforcement;

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  1. Jayadev, Arjun & Bowles, Samuel, 2006. "Guard labor," Journal of Development Economics, Elsevier, vol. 79(2), pages 328-348, April.
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  8. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
  9. Kahan, Arcadius, 1973. "Notes on Serfdom in Western and Eastern Europe," The Journal of Economic History, Cambridge University Press, vol. 33(01), pages 86-99, March.
  10. Schlicht, Ekkehart, 1998. "On Custom in the Economy," OUP Catalogue, Oxford University Press, number 9780198292241.
  11. Wallis, John Joseph & North, Douglass C., 1988. "Should Transaction Costs be Subtracted from Gross National Product?," The Journal of Economic History, Cambridge University Press, vol. 48(03), pages 651-654, September.
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