Propriety, Norms, and Traffic Congestion: Episode 3
The Answer Is Transaction Costs
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The Importance of Transactions Cost Economics
The transactions cost concept was formally proposed by Coase in 1937. Transactions incur costs of negotiation, re-contracting, triangulation, transfer and trust. If we tell the truth and keep our promises, the cost of transactions are dramatically reduced. There's still problems of division of knowledge, but norms and ethical dispositions make a big difference.
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