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Surveying the Transaction Cost Foundations of New Institutional Economics: A Critical Inquiry


  • Giorgos Meramveliotakis
  • Dimitris Milonakis


The purpose of this article is to appraise the analytical usefulness of the new institutionalist approach by investigating the explanatory capacity of the transaction cost concept. After a discussion of the problems of defining the concept of transaction costs through the identification of three different uses of the term found in the literature, we turn to the problems associated with the analytical distinction between the institutional environment and organizations as players of the game, and more specifically to the treatment of organizations as individual actors. Further, it is shown that transaction costs as a concept is inherently unqualified for operationalization. Last, we examine the usefulness of the transaction cost concept in explaining the emergence of organizations by focusing on two specific cases, Coase's and Williamson's theories of the firm. Our conclusion is that the transaction cost concept cannot provide a sufficient rationale for explaining either the emergence of institutions or the origins of organizations given its static, ahistorical and universalistic nature.

Suggested Citation

  • Giorgos Meramveliotakis & Dimitris Milonakis, 2010. "Surveying the Transaction Cost Foundations of New Institutional Economics: A Critical Inquiry," Journal of Economic Issues, Taylor & Francis Journals, vol. 44(4), pages 1045-1072.
  • Handle: RePEc:mes:jeciss:v:44:y:2010:i:4:p:1045-1072 DOI: 10.2753/JEI0021-3624440410

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    References listed on IDEAS

    1. de Cecco, Marcello, 1979. "Origins of the Post-War Payments System," Cambridge Journal of Economics, Oxford University Press, vol. 3(1), pages 49-61, March.
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    3. Markwell, Donald, 2006. "John Maynard Keynes and International Relations: Economic Paths to War and Peace," OUP Catalogue, Oxford University Press, number 9780198292364.
    4. Mario Cedrini, 2008. "Consensus versus freedom or consensus upon freedom? from Washington disorder to the rediscovery of Keynes," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(4), pages 499-522, July.
    5. J. B. Davis, 1990. "Keynes and Organicism," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 12(2), pages 308-315, January.
    6. Anna Maria Carabelli & Mario Aldo Cedrini, 2007. "Current Global Imbalances: Might Keynes Be of Help?," Working Papers 113, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.
    7. Anna Carabelli, 1998. "Keynes on Probability, Uncertainty and Tragic Choices," Cahiers d'Économie Politique, Programme National Persée, vol. 30(1), pages 187-226.
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    Cited by:

    1. Edward Veckie & Vlado Walter Veckie, 2015. "Significance Of Reputation Through The Perspective Of Asset Specificity Transaction Cost Theory," Economy of eastern Croatia yesterday, today, tommorow, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 4, pages 509-517.

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