Edited by Peter G. Klein and Michael E. Sykuta
Chapter 2: Transaction Cost Economics: An Overview
Oliver E. Williamson This overview of transaction cost economics (TCE) differs from prior overviews to which I have contributed in two respects: it is especially oriented at students who are new to but curious about the TCE literature; and it is organized around the ‘Carnegie Triple’ – be disciplined; be interdisciplinary; have an active mind. It is partly autobiographical on the latter account.1 The discussion begins with the Carnegie Triple and sets out five key quotations that anchor the TCE project. The next three sections discuss how TCE implements each element in the triple. Operationalization is then examined. The conclusions follow. Introduction The Carnegie Triple It was my privilege to have been a graduate student at the Graduate School of Industrial Administration (GSIA) at the Carnegie Institute of Technology (now the Tepper School of Business at Carnegie-Mellon University) from 1960 through 1963. Those 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, 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...
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