The Institutional-Transaction-Cost Framework for Public Policy Analysis

Abstract:     
This article presents the institutional-transaction-cost framework for public policy analysis. While many economists have considered institutional effects, none has presented a complete view of how these institutions affect the desirability of policies. By integrating many diverse insights into a single framework, this article provides a means for examining the role of the complete range of institutional factors. It offers a cost effectiveness framework for systematically comparing policies over costs incurred during their enactment, implementation, enforcement, and operation. It also provides a checklist of variables and parameters that are necessary to construct estimates of these costs. With these estimates, an analyst can properly weigh the relevance of these institutional factors. This article then offers two comparisons of water quality policies to demonstrate how this framework is used.

Number of Pages in PDF File: 34

JEL Classification: L50, H10, K23, Q25

working papers series