Economic Costs Essay

8350 Words May 9th, 2012 34 Pages
discussion Papers
Discussion Paper 2007-3 March 1, 2007

Transaction Cost Economics: An Introduction
Oliver E. Williamson
University of California, Berkeley

Abstract:
This overview of transaction cost economics is organized around the “Carnegie Triple” – be disciplined; be interdisciplinary; have an active mind. The first of these urges those who would open up the black box of economic organization to do so in a modest, slow, molecular, definitive way, with the object of deriving refutable implications and submitting these to empirical testing. The second recommends that the student of economic organization be prepared to cross disciplinary boundaries if and as this is needed to preserve veridical contact with the phenomena. The
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These were halcyon years for GSIA.2 The small but accomplished faculty included Herbert Simon, Franco Modigliani, Merton Miller, Richard Cyert, James March, John Muth, Allan Meltzer, and William Cooper, the first three being subsequently awarded Nobel Laureates in Economics. The graduate program was in three parts: economics, organization theory, and operations research. All of the graduate students took core courses in all three and subsequently specialized in one. My major was in economics,

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but I drew continuously on my training in organization theory (and selectively on operations research). The research atmosphere at Carnegie was exhilarating. Old issues were revisited and new issues were opened up. Upon reflection, I describe the training and research at Carnegie in terms of three imperatives: be disciplined; be interdisciplinary; have an active mind. It has been my experience that all applied microeconomists subscribe to the first of these and many to the third. The imperative “be interdisciplinary” is more controversial. Many students (mine included) boggle at organization theory. Partly that is because organization theory is an inherently difficult subject. Also, few faculties have the likes of Simon, Cyert, and March to learn from. Whatever, my advice to students is to go native by removing their economics cap and putting on an organization theory

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