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Keynes, Uncertainty and the Global Economy

Beyond Keynes, Volume Two

Edited by Shelia C. Dow

The revival of interest in Keynesian economics since the late 1980s reinstates the importance of Keynes’s contribution to economic theory and policy. This is the second of two volumes in which authoritative contributions are presented by an outstanding group of international experts to celebrate Keynesian economics, and to review and further the developments of post Keynesian economics of recent years.
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Chapter 4: Transactions costs and uncertainty: theory and practice

Peter J. Buckley and Malcolm Chapman


Peter J. Buckley and Malcolm Chapman1 I LONGITUDINAL AND COMPARATIVE RESEARCH ON TRANSACTIONS COSTS Transactions costs exist in prospect, in retrospect and in process. Their analysis requires a many-faceted approach and poses a challenge for economics. Transaction costs have been described (by Williamson amongst others) as a bridge to other disciplines from economics, but it is essential to realize that bridges are often two-way conduits and that, through the analysis of transaction costs, economics opens itself up to alien influences. Transactions cost-based decisions are non-routine. They cannot be covered by a management philosophy predicated on routine operations. Such decisions are analogous to innovation (for an analysis of the management of innovation see Buckley and Casson, 1992). The decisions involved are idiosyncratic and dynamic. The dynamic nature of transaction costs opens up problem areas for traditional theory. Standard transaction costs analysis, based on a comparative static framework, runs the risk of justifying the (any) status quo, and has difficulty in specifying the conditions which shift the world from one state (a firm/market configuration, for example) to another. The elusive nature of transaction costs and their relationship to other types of cost are also in need of clarification. There are essentially three ways of tackling this problem. The first is to adopt a prospective method, specifying a model by setting out the initial conditions, the key forces driving events and the mechanisms by which these independent variables affect the dependent variable. This is the economic methodology utilized...

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