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Incorporating Ethical and Trust-based Behaviour into Economics: A Transaction Cost Exploration

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  • Anne de Bruin

    (Anne de Bruin, Professor of Economics, Department of Commerce, Massey University, Private Bag 102 904, NSMC, Auckland, New Zealand. Phone + 64 9 414 0800 x 9453 Fax + 64 9 441 8177 Email: a.m.debruin@massey.ac.nz)

  • Chris Moore

    (Chris Moore, Professor of Finance and Banking, Department of Finance, Banking and Property, Massey University, Private Bag 11 222, Palmerston North, New Zealand. Phone: +64 (0) 6 350 5799 x 2330 Fax: +64 (0) 6 350 5628 Email: c.i.moore@massey.ac.nz)

Abstract

This paper explores ethical activity within a transaction cost (TC) framework. It discusses the theoretical and practical links between TC economisation and ethical and trust-based behaviour. By engendering a climate of trust at the micro/firm level, ethical behaviour can reduce TCs associated with monitoring and protection against broken contracts. At the macro/societal level, considerations such as stakeholders’ increasing ethical expectations, may also have TC implications. To distinguish these latter TCs from those at the more micro level, the paper terms them social transaction costs (STCs). While it might be possible to internalise TCs to achieve economisation, STCs cannot be reduced through internalisation.

Suggested Citation

  • Anne de Bruin & Chris Moore, 2005. "Incorporating Ethical and Trust-based Behaviour into Economics: A Transaction Cost Exploration," Journal of Interdisciplinary Economics, , vol. 16(3), pages 289-306, April.
    • Handle: RePEc:sae:jinter:v:16:y:2005:i:3:p:289-306
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    Cited by:

    1. Scott Steele, 2010. "An Organisational Discussion of Incomplete Contracting and Transaction Costs in Conservation Contracts," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(1), pages 163-174, February.

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