Wednesday, August 31, 2005

How Far is Washington From Berkeley?

Whenever we think of transaction costs economics, the name O E Williamson (at UC Berkeley) immediately comes to mind.

But there are actually two strands of thought that can be subsumed under the rubric of transaction costs economics.

In addition to the Williamsonian approach to transaction costs economics, there is another one originated from the department of economics at U of Washington back in the 1970s. And the person at UW who started it all is a Chinese from HK, yes from HK, whose name is
Steven N.S. Cheung.

There are major differences that seperate the Williamsonian approach to transaction costs economics from the one advanced by Steve. In his attempt to resurrect neoclassical economics by incorporating the concept of transaction costs into it, O E Williamson tries to do so by going beyond the narrow confine of economics. Hence, he relies heavily on the work by organizational theorits and sociologists. Steve, in sharp contrast, still works within the good old Marshallian partial equilibrium, price theory tradition. He does modify the traditional tools a lot, but one can still see the imprints of Marshall that pervade his work throughout. There are other differences and I will write more about them later.

One important reason why so many people will usually associate transaction costs economics with O E Williamson alone is that he has a lot of books and collected essays out there. While other than his Ph.D. thesis Theory of Share Tenancy and two short monographs (Will China go Capitalist and Myth of Social Costs, both are IEA essays), all of Steve's work is scatted in scholarly journals.

But that is about to change. A collection of all the important papers by Steve will be out this Fall.

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