Transaction Costs and the Perceived Effectiveness of Complex Institutional Systems

This article studies factors affecting how policy actors perceive the effectiveness of political institutions involved in complex water governance systems. The ecology of games framework argues that participants are more likely to perceive institutions as effective when the benefits of solving collective action problems outweigh the transaction costs of developing political contracts within these institutions. The authors hypothesize that transaction costs are a function of conflict, type of participation, political knowledge, scientific knowledge, and actor resources. Survey results suggest that the importance of these different sources of transaction costs varies across study sites in the Tampa Bay watershed in Florida, the Sacramento–San Joaquin River delta in California, and the Paraná River delta in Argentina. Based on the observed differences, some initial ideas are sketched about the evolution of complex governance systems from fairly simple and informal rules and networks to well‐established tapestries of many formal institutions.     

Transaction costs and inter‐jurisdictional cooperation: an application to land use collaboration

• The costs and benefits of inter‐jurisdictional cooperation and how these impede strategic alliances among jurisdictions is an issue of growing importance worldwide. The reason is the potential cost savings, efficiency increase and economic development benefits that can be realized through cooperation. The literature has increasingly mentioned transaction costs as obstacles that mitigate cooperation and as a key component of cooperation costs, which must be outweighed by cooperation benefits in order for communities to perceive advantageous strategic alliances. However, a framework is lacking in the literature for evaluating the implications of transaction costs for inter‐jurisdictional cooperation. This paper develops a framework for evaluating the nature and dynamics of transaction costs and their implications for inter‐jurisdictional cooperation, with an application to land use. A simple cost function model is used to explain the costs and challenges associated with managing coordinated, cooperative or consolidated relationships, and the dynamics of such costs. The analysis highlights the importance of such things as degree of complexity, inter‐party diversity and the relative sizes of collaborating partners. An application to land use cooperation in Michigan suggests that policies to eliminate transaction costs could help reduce the barriers to cooperation of various types.

Copyright © 2010 John Wiley & Sons, Ltd.     

公共物品供给的交易费用多维度分析

制度分析学派通过不同制度的交易费用状况的比较,对各种制度的特征进行了较充分的分析.但是,对于公共物品的供给制度来说,由于公共物品的公共性价值特征导致的交易费用的复杂性,不能在单一维度的视角下笼统地仅考虑费用的数量大小,由此来评判制度安排和公共决策的好坏.因为除了信息不对称因素所产生的交易费用以外,有相当一部分被视为诱发交易费用的行为实际上是在体现和保证物品的公共性,这些费用表现为公共协商的成本和对损失方补偿的费用.试图从多种维度对公共物品供给中的交易费用进行分析,不仅对信息不对称如何产生交易费用进行了描述,还对公共协商和对损失方补偿产生的费用所表现出的公共性价值进行了解析;并借用了公共选择学派的广义宪政经济学理论,探讨了交易费用的最优解;最后倡导建立具有公共性特征的公共物品供给的交易费用现.     

The contractual nature of budgeting: A transaction cost perspective on the design of budgeting institutions

Viewing budgets as contracts, transaction cost theory focuses on the costs of negotiating and enforcing the myriad political agreements by which policymakers allocate the government's resources. This essay provides an overview of transaction cost theory and its implications for the design of budgeting institutions. It contrasts the behavioral premises (bounded rationality and opportunism) of the transaction cost approach with those of more traditional budgetary theories, and examines whether commitment and agency costs have structured budget actors' institutional choices. Investigation of the usage of key budget instruments- entitlements, multi-year appropriations, and tax expenditures - suggests that Congress has been more discriminating in its institutional choices than is commonly supposed. Sensitivity to the importance of transaction costs would increase the effectiveness of budget reforms.     

A general theory of interpersonal exchange

A general theory of interpersonal exchange is developed from a public goods, public choice point of view and within an analytical context that assesses both the benefits and the costs of social interaction. Social transaction benefits and costs are specified as a composite function of interpersonal bindingness, which itself depends upon five parameters. The model provides for the determination of an optimal personal degree of bindingness in a two-person relationship. Extensions encompass the more interesting reaction case, where two individuals each select their own optimal personal bindingness levels. Applications and conclusions complete the paper. qu]When love beckons to you, follow him, Though his ways are hard and steep ... For even as love crowns you so shall he crucify you. Even as he is for your growth so is he for your pruning. Kahlil Gibran The Prophet     

When do middlemen matter? Evidence from variation in corruption in India

Corruption is a persistent problem in developing countries, and recent scholarship suggests that middlemen play an important role in corrupt acts. Yet, while intermediaries can reduce transaction costs in illicit exchange, they also increase agency costs and reduce benefits to others. The involvement of middlemen may thus vary. I argue that middlemen are most likely to engage in, and benefit from, the subset of corruption transactions that are repeated frequently, but not by the same parties. I test the implications of this argument using survey experiments administered to a large sample of politicians and bureaucrats at multiple levels of government in India. I show that middlemen are critical, but far from ubiquitous. Intermediaries are more relevant where corrupt deals are frequent but involve unfamiliar potential principals. My results suggest that anticorruption efforts must pay greater attention to the type of corruption and the incentives of middlemen.     

Does Fiscal Stress Induce Privatization? Correlates of Private and Intermunicipal Contracting, 1992–2002

Using Census of Governments data, preferences for private and intermunicipal contracting by U.S. counties during the 1992–2002 period are modeled as a function of established economic and political factors. After distinguishing between private and intermunicipal contracting, there is no evidence that fiscal stress induces privatization. High debt levels are associated with fewer publicly delivered services, but counties with high debt are as likely to partner with neighboring municipalities as they are with private firms. Political factors are weak predictors of either form of contracting. The strongest and most reliable predictor of both private and intermunicipal contracting is the creation of new public services. These findings imply the strategic use of contracting for trial, temporary, or contingent services.     

Toward the usable recognition of individual benefits and costs in regulatory analysis and governance

Regulatory agencies in the United States and Europe have well‐deserved reputations for fixating on the total benefits and costs of proposed and final regulatory actions, without doing any more than anecdotally mentioning the subpopulations and individuals who may bear disproportionate costs or reap disproportionate benefits. This is especially true on the “cost” side of the cost–benefit ledger, where analysts exert little effort to even inform decisionmakers and the public that the costs of regulations might be distributed either regressively or progressively. Many scholars and advocates have observed that regulation can increase the efficiency of market outcomes, but caution about its untoward (or suboptimal) effects on equity. Here, we argue that without considering distributional information about costs and benefits, regulatory policies in fact can also cause violence to notions of efficiency, for two reasons: (i) society cannot hope to approach Pareto‐efficient outcomes without identifying those who must lose so that others can gain more; and (ii) because the harm experienced by involuntary risks and by imposed regulatory costs is likely non‐linear in its magnitude (at the individual level), efficiency is, in fact, a strong function of the shape of the distribution of these effects. This article reviews evidence about the distribution of regulatory costs and benefits, describes how agencies fail to incorporate readily available distributional information, and sketches a vision for how they could analyze costs and benefits to promote more efficient regulatory choices and outcomes.     

Cost and the calculus of voting

Downs's (1957) theory of voting maintains that individuals balance the costs of voting against anticipated benefits in deciding whether to vote. However, most empirical tests of his theory have concluded that costs play little role in individuals' decisions to vote or abstain, and that benefits are the determining factor. Unfortunately, the existing empirical tests of the theory have been inadequate, especially in regard to the measurement of the cost of voting. Using data from the Comparative State Elections Project, we develop an improved indicator of the cost of voting. When this measure of cost is used in a test of Down's theory, we find, contrary to most earlier research, that the cost of voting seems to be a more important determinant of participation than the factors associated with voting benefits in Downs's model.The authors shared equally in the research reported; the order in which they are listed was determined randomly.     

Do intergovernmental transfers affect the distribution of manufacturing production across regions in federal countries? Theory and evidence for Argentina

The effect of changes in the distribution of top-to-bottom intergovernmental transfers on the location of manufacturing production is analysed using a modified version of the footloose capital model. An increase in the share of transfers received by a region increases its share of manufacturing production the larger are transaction costs; the larger is the share of transfers going directly to consumers; the larger is the share of manufacturing consumption vis-à-vis non-tradable consumption; and the easier consumers can substitute among manufacturing varieties. Using data for Argentina for 1983-2005, the empirical analysis appears to support the existence of two distinctive regimes, with smaller/poorer provinces benefiting in terms of the location of manufacturing production as a response to an increase in transfers. Also, for these provinces, the benefits are greater if they are politically aligned with the federal government, especially through the receipt of discretionary transfers. For large/rich provinces, the evidence is less conclusive.     

当代社会公民权利与公共管理的逻辑关系——基于社会契约论的视角

人类的群体性活动决定了人与人之间权利义务的相互性。在自然法条件下,每个理性的公民都设法把自己利益最大化,这种交集的必然结果就会导致无政府状态下的交易成本增加。为了减少交易成本,公民共同让渡出部分权利以契约的形式委托第三方代为管理,这便产生了公共管理。因此,公共管理以公民权利实现为基础,公共管理部门作为契约的委托人,必须在契约所规定的范围内活动,以实现公共利益的最大化为目的。随着公民社会的进一步成熟决定社会公共管理走社会、市场、政府有机结合是有效实现公民权利的必由之路。     

Information Exchange in Policy Networks

Information exchange in policy networks is usually attributed to preference similarity, influence reputation, social trust, and institutional actor roles. We suggest that political opportunity structures and transaction costs play another crucial role and estimate a rich statistical network model on tie formation in the German toxic chemicals policy domain. The results indicate that the effect of preference similarity is absorbed by institutional, relational, and social opportunity structures. Political actors choose contacts who minimize transaction costs while maximizing outreach and information. We also find that different types of information exchange operate in complementary, but not necessarily congruent, ways.     

Does inconvenience explain low take‐up? Evidence from unemployment insurance

Application inconvenience is one popular explanation for why many individuals do not receive the social benefits for which they are eligible. Applications take time and some individuals may decide that the financial benefits do not outweigh these time costs. This paper investigates this explanation using cross‐state variation in administrative changes that made applying for unemployment insurance (UI) benefits substantially more convenient over the past decade. We find that the introduction of phone‐ and Internet‐based claiming did not have an appreciable impact on overall UI take‐up, nor did it lead to a shift toward recipients that are higher income or likely to be receiving the maximum benefit amount. These findings are inconsistent with a time‐ and transaction‐cost explanation for low take‐up, since remote UI claiming is less time intensive. This suggests that reducing application barriers alone may not be an effective tool for increasing program participation. © 2010 by the Association for Public Policy Analysis and Management.     

Appropriation, violent enforcement, and transaction costs: a critical survey

This paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach. It has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that Coaseian bargaining can be extended to any institutional scenario, i.e., voluntary as well as coercive exchange. However, voluntary transactions cannot capture the logic of coercive power. This means that the assumption of an efficient political market is not valid, and that the ??political Coase theorem?? lacks the logical consistency to provide a cornerstone for political theory.     

The Conditionality of Vote‐Buying Norms: Experimental Evidence from Latin America

Anti‐vote‐buying campaigns led by NGOs and political elites denounce the practice as a crass economic transaction detrimental to democracy. Do potential clients stigmatize vote buying to the same degree, or does the mass public have a more conditional view of the acceptability of vote buying? We theorize that normative evaluations of vote buying vary based on individuals’ understanding of the transaction itself and abstract societal costs associated with the practice. We assess this perspective using survey experiments conducted in several Latin American countries that present hypothetical vote‐buying situations for evaluation by respondents, varying the socioeconomic status of the hypothetical client and the client's political predispositions. We find that the disapproval of vote buying is highly conditional on the attributes of the hypothetical client and that evaluations of vote buying depend on conceptions of the concrete benefits and abstract costs of vote buying as a part of electoral politics.     

Transaction costs can encourage Coasean bargaining

When there are three parties, instability problems brought about by the emptiness of the core of the corresponding cooperative game may cause the Coase Theorem to fail, even when other more direct impediments to bargaining are low. We show that the standard Coasean bargaining game involving three parties is strategically equivalent to an asymmetric three-player majority game. Hence, when there are three parties, instability problems will cause the Coase Theorem to fail if and only if the core of the corresponding three-player majority game is empty. We use this equivalence result to derive all instances in which the Coase Theorem will and will not hold with three parties, and show that a priori, such instability problems are likely to be rare—the Coase Theorem will actually hold most (over 80 %) of the time. We also demonstrate that it is always possible to find a set of transaction costs which, when introduced into a frictionless bargaining situation, will cause an empty core to become non-empty. In other words, transaction costs can mitigate instability problems: situations exist in which the presence of transaction costs will cause the Coase Theorem to hold when, in the absence of those direct transaction costs, it would fail to hold. When there are three parties, rather than hindering agreements, the existence of direct transaction costs can sometimes—but not always—reduce instability and encourage Coasean bargaining.     

Municipal Bond New Issue Transaction Costs

As with any market, there are transaction costs associated with the sale of municipal bonds. Only a small number of studies have examined this topic, and therefore we have only a limited understanding of the magnitude and determinants of new issue municipal bond transaction costs. We use data on California municipal bond transaction costs from 2007 to 2009 to test whether scale economies exist. We find that there are considerable transaction cost scale economies for California municipal bonds and that pooling bond sales would likely save substantial amounts of money.     

The costs of collectivization,per se

The question of collectivization becomes relevant in the post-financial crisis years as characterized by growing criticism of market organization. Collectivization, the social structure distinguishable from the market or central planning agency, can be costly from overspending. In our analytical framework, the political order remains polycentric. The most widely acceptable institutional solution may be budgetary outlay sufficient to meet all demand, and especially when it is recognized that public criticism of market alternatives is often concentrated on moral goods, e.g., health care. The excess burden of collectivization, per se, is the excess of costs over benefits if the collectivity meets individual demand for the good beyond plausible efficiency levels. The costs of collectivization, per se, can be reduced by separated budgets, showing both revenue and outlay for individual budgetary line items, that bring collective spending decisions closer to the accompanying levy of taxes.     

The role of political parties: An analysis based on transaction costs

This paper explores the proposition that political parties reduce the ‘transaction costs’ of electoral participation. Political parties provide a low cost signal of a candidate's policies and personal characteristics and, in this way, reduce voters' information costs. With reference to ‘transaction cost economics’, political parties offer an ‘implicit contract’ between voters and politicians and thereby reduce the scope for opportunism by politicians. This impact on transaction costs is important in any evaluation of public policy towards political parties.