The Role of Transaction Costs in Douglass North’s Understanding of the Process of Change in Economic History

26 Pages Posted: 12 Nov 2018

See all articles by Rosolino Candela

Rosolino Candela

Mercatus Center at George Mason University

Date Written: November 11, 2018

Abstract

The purpose of this chapter is an attempt to reconstruct the evolution of North’s approach to understanding economic history. Underlying this evolution has been an increasing recognition of the role that transaction costs play in explaining the economic performance of different societies through time. I argue that, as a by-product of North’s emphasis on transaction costs throughout his scholarship, he transitioned from a neoclassical to an Austrian understanding of the process of economic change. The implications of North’s growing emphasis on transactions costs throughout his career was a growing importance of other complementary features of economic theory, shared by Austrians, to explain processes of institutional change throughout economic history. These features of Austrian economic theory include: methodological subjectivism; competition and discovery under uncertainty; a dynamic conception of learning through time; and the role of ideology in structuring the patterns of meaning and purpose attached to human action.

Keywords: Douglass North; Economic History; Institutions; Transaction Costs

JEL Classification: B25; B31; B41; D23

Suggested Citation

Candela, Rosolino, The Role of Transaction Costs in Douglass North’s Understanding of the Process of Change in Economic History (November 11, 2018). Available at SSRN: https://ssrn.com/abstract=3282751 or http://dx.doi.org/10.2139/ssrn.3282751

Rosolino Candela (Contact Author)

Mercatus Center at George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

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