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Abstract:
It being the case that law and economics is a success story, what are the reasons to call upon organization? Three related reasons are advanced here.

First, the orthodox theory of the firm-as-production function is self-limiting and needs, for some purposes, to be joined with the theory of the firm-as-governance structure. Organization theory makes essential contributions to that project. Second, such a move has lessons for public policy analysis. Earlier and ongoing errors in antitrust and regulation are flagged and can be avoided as a consequence. And third, the traditional approach to teaching contract in the law school is reshaped if attention is shifted away from adjudication to focus predominantly on governance - as it should be.

Abstract:
This paper provides an economic analysis of multi-client, multi-service accounting firms. The objective is to aid in the development of a new framework for auditor independence. We adopt the modern theory of the economics of organization, which views organizational structures and relationships as the results of efforts to create and deliver value. We see auditor independence as a property of auditors' interests, both at a personal level and at the level of the accounting firm. A proper assessment of auditors' interests requires a holistic approach. That is, in assessing auditor independence, we must examine the totality of auditors' interests. We identify and analyze a complex web of institutional and personal incentives that affect auditors' interest

auditor independence, economic analysis, public accounting firm

Abstract:
The public bureaucracy is a puzzle. How is it that an organizational form that is so widely used is also believed to be inefficient - both in relation to a hypothetical ideal and in comparison with private bureaucracies? This article examines public bureaucracy through the lens of transaction cost economics, according to which the public bureaucracy, like other alternative modes of governance, is well suited to some transactions and poorly suited to others. Rather than proceed in a completely general way, I focus on what James Q. Wilson describes as 'sovereign transactions', of which foreign affairs is an example. I ask what it is that distinguishes sovereign transactions, after which I compare the efficacy of public and private bureaucracies for managing such transactions. I conclude that there is an efficiency place for public bureaucracy, but that all modes of governance (markets, hybrids, firms, regulation), of which public bureaucracy is one, need to be kept in their place. I further observe that public bureaucracies are not all of a kind and that differences between them need to be distinguished.

Abstract:
Numerous significant past and recent contributions to the literature on the efficacy of corporate boards of directors notwithstanding, a consensus has yet to develop. Partly this is due to a failure to agree on the ground rules, to which the use of different lenses through which to observe and interpret corporate boards is a contributing factor. This article examines corporate boards through the lens of contract/governance with the object of (1) uncovering the factors that are responsible for the intrinsic limitations of boards in monitoring and managing respects and, in consideration of these limitations, (2) advising on the merits of proposed reforms, to which credibility considerations and the integrity of delegation are relevant. A more accepting interpretation of practices regarded by many as problematic emerges, but not without qualifications and express concern for bad actors. (JEL G30, G34, K22, L14)

Abstract:
This study analyzes organization of economic activity within and between markets and hierarchies. It considers the transaction to be the ultimate unit of microeconomic analysis, and defines hierarchical transactions as ones for which a single administrative entity spans both sides of the transaction, some form of subordination prevails and, typically, consolidated ownership obtains. Discusses the advantages of the transactional approach by examining three issues: price discrimination, insurance, and vertical integration. Develops the concept of the organizational failure framework, and demonstrates why it is always the combination of human with environmental factors, not either taken by itself, that causes transactional problems. The study also describes each of the transactional relations of interest, and presents the advantages of internal organization with respect to the transactional condition. The analysis explains why primary work groups of the peer group and simple hierarchy types arise. The same transactional factor which impede autonomous contracting between individuals also impede market exchange between technologically separable work groups. Peer groups can be understood as an internal organizational response to the frictions of intermediate product markets, while conglomerate organization can be seen as a response to failures in the capital market. In both contexts, the same human factors, such as bounded rationality and opportunism, occur. Examines the reasons for and properties of the employment relation, which is commonly associated with voluntary subordination. The analysis attempts better to assess the employment relation in circumstances where workers acquire, during the course of the employment, significant job-specific skills and knowledge. The study compares alternative labor-contracting modes and demonstrates that collective organization is helpful in enhancing the acquisition of idiosyncratic knowledge and skills by the work force. The study then examines more complex structures -- the movement from simple hierarchies to the vertical integration of firms, then multidivisional structures, conglomerates, monopolies and oligopolies. Discusses the market structure in relation to technical and organizational innovation. The study proposes a systems approach to the innovation process. Its purpose is to permit the realization of the distinctive advantages of both small and large firms which apply at different stages of the innovation process. The analysis also examines the relation of organizational innovation to technological innovation. (AT)

Peer groups, Market structures, Uncertainty, Vertical integration, Labor markets, Financial markets, Public policies, Innovation process, Monopolies, Oligopolies, Organizational structures, Environment, Transaction costs, Technology innovation

Abstract:
This study is based on the belief that economic organization is shaped by transaction cost economizing decisions. It sets out the basic principles of transaction cost economics, applies the basic arguments to economic institutions, and develops public policy implications. Any issue that arises, or can be recast as a matter of contracting, is usefully examined in terms of transaction costs. Transaction cost economics maintains that governance of contractual relations is mainly achieved through institutions of private ordering instead of legal centralism. This approach is based on behavioral assumptions of bounded rationalism and opportunism, which reflect actual human nature. These assumptions underlie the problem of economic organization: to create contract and governance structures that economize on bounded rationality while safeguarding transactions against the hazards of opportunism. The book first summarizes the transaction cost economics approach to the study of economic organization. It develops the underlying behavioral assumptions and the types of transactions; alternative approaches to the world of contracts are presented. Assuming that firms are best regarded as a governance structure, a comparative institutional approach to the governance of contractual relations is set out. The evidence, theory, and policy of vertical integration are discussed, on the basis that the decision to integrate is paradigmatic to transaction cost analysis. The incentives and bureaucratic limits of internal organization are presented, including the dilemma of why a large firm can't do everything a collection of small firms can do. The economics of organization in presented in terms of transaction costs, showing that hierarchy also serves efficiency and permits a variety of predictions about the organization of work. Efficient labor organization is explored; on the assumption that an authority relation prevails between workers and managers, what governance structure supports will be made in response to various types of job attributes are discussed, and implications for union organization are developed. Considering antitrust ramifications of transaction cost economics, the book summarizes transaction cost issues that arise in the context of contracting, merger, and strategic behavior, and challenges earlier antitrust preoccupation with monopoly. (TNM)

Institutional economics, Capitalism, Contracts & agreements, Organizational structures, Firm governance, Labor force, Economic theory, Transaction costs, Transaction cost economics, Vertical integration

Abstract:
Theories commonly progress through four stages, from informal to pre-formal to semi-formal and fully formal. This paper reports on the earliest stage of transaction cost economics that extended from the 1920s to the 1970s. That the gestation stage lasted so long is partly because transaction cost economics departed significantly from the then-prevailing economic orthodoxy. Also, and related, it is an interdisciplinary undertaking. As reported herein, transaction cost economics selectively combines economics, organisation theory and law and is the product of the contributions of some of the finest minds in those three fields.

Abstract:
This paper begins with a sketch of the New Institutional Economics, with special emphasis on the "institutional environment" (North and others) and the "institutions of governance" (Coase and others). Thereafter the paper mainly emphasizes the applications of transaction cost economics to the study of governance, the object being to effect an economizing alignment between transactions, which differ in their cost and competence. I raise a series of issues -- phenomena of interest, describing human agents, describing firms, purposes served, scaling up -- to which any would-be theory of the firm should be expected to speak and indicate how transaction cost economics responds to each. I thereafter describe the mechanisms through which transaction cost economics is implemented and envelop some of the core conceptual supports out of which it works. Applications to public bureaus, strategic management, and intractable transactions are sketched.