The Elgar Companion to Transaction Cost Economics
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The Elgar Companion to Transaction Cost Economics

Edited by Peter G. Klein and Michael E. Sykuta

Since its emergence in the 1970s, transaction cost economics (TCE) has become a leading approach in the research on contracts, firm organization and strategy, antitrust, marketing, inter-firm collaboration and entrepreneurship. With contributions by leading scholars in economics, law and business administration – including Oliver E. Williamson, recipient of the 2009 Nobel Prize in economics for his development of the transaction cost approach – this volume reviews the latest developments in TCE and applies them to contemporary theoretical and empirical problems.
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Chapter 7: Commons, Hurst, Macaulay, and the Wisconsin Legal Tradition

D. Gordon Smith


D. Gordon Smith In art ‘negative space’ is the space between, around, and behind the positive forms in a visual composition (Rockman, 2000, p. 22). While our brains are conditioned to recognize, name and categorize objects, negative space helps to define those objects, and artists consider both positive shapes and negative space in arranging a composition (Edwards, 1989, pp. 98–100). Perhaps the most famous illustration of negative space is Rubin’s vase, an optical illusion in which a white vase is formed by opposing black silhouettes. When first presented with the composition, most people see the opposing faces, but when the shading is reversed – so that the vase is black and the faces are white – the vase is easily perceived. Over a period of a half century, scholars at the University of Wisconsin focused our attention on the negative space surrounding contract law (Gilmore, 1974, p. 3, n. 1). What they found there was a fascinating world of contracting behaviour – or, in more modern parlance, private ordering – that Ian Macneil (1974, 2000) subsequently explored in developing his relational theory of contracts. Oliver Williamson was aware of the work of the Wisconsin scholars (Williamson, 1985, p. 3) and Macneil (Williamson, 1996, p. 355), and in this chapter I trace the legal precursors of transaction cost economics (TCE) by focusing on three prominent faculty of the University of Wisconsin: John Commons, Willard Hurst, and Stewart Macaulay. This focus necessarily omits some of the connective tissue in the intellectual history, from Oliver Rundell...

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