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Argentina’s Federal Fiscal Institutions: A case study in the transaction…
Argentina’s Federal Fiscal Institutions:
A case study in the transaction-cost theory of politics
Sebastián Saiegh and Mariano Tommasi
Abstract
Introduction
I. Analytical Framework
B. A Transaction-Cost Theory of Politics
transaction costs consist of the ex-ante costs of negotiating, arranging and drafting an agreement and especially the ex-post costs of monitoring and enforcing it (North, 1990a: 27-33).
The typical examples of transaction costs
drawn form the industrial organization literature, include
asymmetric information, opportunism resulting from principal-agent relationships, coordination costs, and asset specificity
(Williamson, 1989)
four dimensions are usually listed as important in order to identify these costs
frequency and duration
one-shot attempts at cooperating frequently run into indomitable pitfalls (increasing the costs of transacting)
whereas everyday interactions have the potential to establish ongoing understandings and reputations (decreasing the costs of transacting).
complexity or uncertainty
Given that individuals are boundedly rational, the more complex, uncertain and dynamic the environment, the harder it will be for them to think and compute every possible future state of the world.
specificity of assets
“the difference between the value of their use within a specific relationship and their value outside that relationship.” (Epstein and O’Halloran, 1997: 46). 18
measurement costs;
which consist of the costs of measuring the valuable attributes of what is being exchanged
Some listings also include the connectedness of the transaction to other transactions involving other
people
A. The Neoinstitutional Approach
Modern institutional economics seeks to deal with "the man as he is, acting -- as Coase put it -- [with the support and] within the constraints of real institutions". A description of the "institutional man," shall include a cognitive assumption of bounded rationality and a self-interest postulate that includes opportunism (North, 1990a: 20-24; Williamson, 1989: 138-140).
Bounded rationality,
self-interest
Situations of adverse selection and moral hazard, therefore, are subsumed by this characterization of human condition
individuals will make reasonable commitments, and opportunistic behaviors will be discouraged only if contracts and their fulfillment can be enforced.
The cost of transacting, thus, reintroduces the question of economic cooperation in a world of imperfect human beings. Under the neoclassical postulates, transaction costs are assumed to be zero: it is costless to discover with whom one wishes to exchange, to negotiate and to enforce an agreement. This