Transaction Costs and Institutions' Efficiency: A Critical Approach

Institutions cannot “work” by themselves, that is, without necessary efforts for enforcing, preserving, and improving them. For many economists, these efforts represent the costs of the economic system at work. Nowadays in institutional economics, the costs of running the economic system are generally called “transaction costs.” This article will offer a critical approach on the significance of transaction costs. This study highlights the necessity of subordinating the efficiency criterion to the ethics criterion, not only in the human action area, but mostly in institutions, as rules of the game in the society.