“Following the lead given by new institutional economics, we shall take the transaction as our unit of analysis. For our purposes, a transaction can be thought of as any act of social exchange that depends on information flows for its accomplishment. Transactions can be as simple and brief as the purchase of a packet of cigarettes, or as complex as and extended as those which bind a Zen master to his disciples. Like institutional economists, we are interested in the relationship that can be established between different transactional characteristics and the phenomenon of institutionalization. Our use of the term transaction, however, will extend beyond that of institutional economics where the focus has tended to be primarily on transaction costs and efficiency considerations. These, to be sure, are relevant. But, as we shall see, they are not the whole story.”

— Max Boisot

Source: Knowledge Assets, 1998, p. 124; As cited in: Ortiz et al. (2006)

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Max Boisot 17

British academic and educator 1943–2011

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“The smallest unit of the institutional economists is a unit of activity — a transaction, with its participants. Transactions intervene between the labor of the classic economists and the pleasures of the hedonic economists, simply because it is society that controls access to the forces of nature, and transactions are, not the "exchange of commodities," but the alienation and acquisition, between individuals, of the rights of property and liberty created by society, which must therefore be negotiated between the parties concerned before labor can produce, or consumers can consume, or commodities be physically exchanged.”

John R. Commons (1862–1945) United States institutional economist and labor historian

Source: "Institutional Economics," 1931, p. 652

“We shall also concern ourselves with the institutional order built up from transactions, but our focus will be less narrowly economic than the one adopted by Williamson. Like him, we shall argue that institutional structures aim partly at achieving transactional efficiencies and that where such efficiencies are effectively achieved they act somewhat like a magnetic field – a mathematician would call them ‘attractors’ – drawing the uncommitted transaction into a given institutional orbit. Yet in contrast to Williamson’s, our concept of transactions is underpinned by an explicit rather than an implicit theory of information production and exchange which yields a different way of classifying them as well as a distinctive approach to their governance. We find ourselves in consequence in the realm of political economy rather than of economics tout court.”

Max Boisot (1943–2011) British academic and educator

Source: Information Space, 1995, p. 235

“To summarize, the production of information and its use in transactions both incur costs and are thus subject to economizing. In the 1970s, there occurred a revival of interest among economists in the economics of transaction, and Oliver Williamson in particular, building on the earlier work of Ronald Coase and John Commons, has explored the different institutional arrangements that govern transactional choices.”

Max Boisot (1943–2011) British academic and educator

Variant: To summarize, the production of information and its use in transactions both incur costs and are thus subject to economizing. In the 1970s, there occurred a revival of interest among economists in the economics of transaction, and Oliver Williamson in particular, building on the earlier work of Ronald Coase and John Commons, has explored the different institutional arrangements that govern transactional choices.
Source: Knowledge Assets, 1998, p. 235

“These individual actions are really trans-actions instead of either individual behavior or the "exchange" of commodities. It is this shift from commodities and individuals to transactions and working rules of collective action that marks the transition from the classical and hedonic schools to the institutional schools of economic thinking. The shift is a change in the ultimate unit of economic investigation. The classic and hedonic economists, with their communistic and anarchistic offshoots, founded their theories on the relation of man to nature, but institutionalism is a relation of man to man. The smallest unit of the classic economists was a commodity produced by labor. The smallest unit of the hedonic economists was the same or similar commodity enjoyed by ultimate consumers. One was the objective side, the other the subjective side, of the same relation between the individual and the forces of nature. The outcome, in either case, was the materialistic metaphor of an automatic equilibrium, analogous to the waves of the ocean, but personified as "seeking their level." But the smallest unit of the institutional economists is a unit of activity -- a transaction, with its participants. Transactions intervene between the labor of the classic economists and the pleasures of the hedonic economists, simply because it is society that controls access to the forces of nature, and transactions are, not the "exchange of commodities," but the alienation and acquisition, between individuals, of the rights of property and liberty created by society, which must therefore be negotiated between the parties concerned before labor can produce, or consumers can consume, or commodities be physically exchanged.”

John R. Commons (1862–1945) United States institutional economist and labor historian

"Institutional Economics," 1931

“Since institutional economics is behavioristic, and the behavior in question is none other than the behavior of individuals while participating in transactions, institutional economics must make an analysis of the economic behavior of individuals.”

John R. Commons (1862–1945) United States institutional economist and labor historian

Source: "Institutional Economics," 1931, p. 654

“Markets are institutions that exist to facilitate exchange, that is, they exist in order to reduce the cost of carrying out exchange transactions. In an economic theory which assumes that transaction costs are nonexistent. markets have no function to perform, and it seems perfectly reasonable to develop the theory of exchange by an elaborate analysis of individuals exchanging nuts for apples on the edge of the forest or some similar fanciful example. This analysis certainly shows why there is a gain from trade, but it fails to deal with the factors which determine how much trade there is or what goods are traded.”

Ronald H. Coase (1910–2013) British economist and author

1960s-1980s, "The Firm, the Market, and the Law" (1988)

“Transaction costs were used in the one case to show that if they are not included in the analysis, the firm has no purpose, while in the other I showed, as I thought, that if transaction costs were not introduced into the analysis, for the range of problems considered, the law had no purpose.”

Ronald H. Coase The Nature of the Firm

Ronald H. Coase (1988). "The Nature of the Firm: Influence." Journal of Law, Economics, and Organization 4 (No. 1, Spring): 33—47. p. 34; as cited in Eggertsson (1990; xiii)
1960s-1980s

“The limit to the size of the firm is set where its costs of organizing a transaction become equal to the cost of carrying it out through the market. This determines what the firm buys, produces, and sells. As the concept of transaction costs is not usually used by economists, it is not surprising that an approach which incorporates it will find some difficulty in getting itself accepted. We can best understand this attitude if we consider not the firm but the market.”

Ronald H. Coase (1910–2013) British economist and author

1960s-1980s, "The Firm, the Market, and the Law" (1988)

“Cyberspace consists of transactions, relationships, and thought itself, arrayed like a standing wave in the web of our communications. Ours is a world that is both everywhere and nowhere, but it is not where bodies live.”

John Perry Barlow A Declaration of the Independence of Cyberspace

A Declaration of the Independence of Cyberspace (1996)
Context: You claim there are problems among us that you need to solve. You use this claim as an excuse to invade our precincts. Many of these problems don't exist. Where there are real conflicts, where there are wrongs, we will identify them and address them by our means. We are forming our own Social Contract. This governance will arise according to the conditions of our world, not yours. Our world is different.
Cyberspace consists of transactions, relationships, and thought itself, arrayed like a standing wave in the web of our communications. Ours is a world that is both everywhere and nowhere, but it is not where bodies live.
We are creating a world that all may enter without privilege or prejudice accorded by race, economic power, military force, or station of birth.
We are creating a world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity.
Your legal concepts of property, expression, identity, movement, and context do not apply to us. They are all based on matter, and there is no matter here.

“Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market. Within a firm, these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-coordinator, who directs production. It is clear that these are alternative methods of coordinating production. Yet, having regard to the fact that, if production is regulated by price movements, production could be carried on without any organization at all might we ask, why is there any organization?”

Ronald H. Coase (1910–2013) British economist and author

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 388

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Max Boisot 17

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