Following the lead given by new institutional economics, we shall take the transaction as our unit of analysis. For our purposes, a transaction can be thought of as any act of social exchange that depends on information flows for its accomplishment. Transactions can be as simple and brief as the purchase of a packet of cigarettes, or as complex as and extended as those which bind a Zen master to his disciples. Like institutional economists, we are interested in the relationship that can be established between different transactional characteristics and the phenomenon of institutionalization. Our use of the term transaction, however, will extend beyond that of institutional economics where the focus has tended to be primarily on transaction costs and efficiency considerations. These, to be sure, are relevant. But, as we shall see, they are not the whole story.
Max BoisotRelated topics
act beyond bind complex different economics following given lead master packet see simple story sure take thought unit use costsRelated quotes
A digital computer can usually be regarded as consisting of three parts: (i) Store. (ii) Executive unit. (iii) Control. ...The executive unit is the part which carries out the various individual operations involved in a calculation. ...It is the duty of the control to see that...[the table of] instructions are obeyed correctly and in the right order. ...A typical instruction might say-"Add the number stored in position 6809 to that in 4302 and put the result back into the latter storage position." Needless to say it would not occur in the machine expressed in English. It would more likely be coded in a form such as 6809430217. Here 17 says which of various possible operations [add] is to be performed on the two numbers. ...It will be noticed that the instruction takes up 10 digits and so forms one packet of information...
Alan Turing
Man experiences a multitude of needs, on whose satisfaction his happiness depends, and whose non-satisfaction entails suffering. Alone and isolated, he could only provide in an incomplete, insufficient manner for these incessant needs. The instinct of sociability brings him together with similar persons, and drives him into communication with them. Therefore, impelled by the self-interest of the individuals thus brought together, a certain division of labor is established, necessarily followed by exchanges. In brief, we see an organization emerge, by means of which man can more completely satisfy his needs than he could living in isolation.This natural organization is called society.The object of society is therefore the most complete satisfaction of man's needs. The division of labor and exchange are the means by which this is accomplished.
Gustave de Molinari
As conceived in this book, economics is the science of rational choice in a world─our world─in which resources are limited in relation to human wants. The task of economics, so defined, is to explore the implications of assuming that man is a rational maximizer of his ends in life, his satisfactions─what we shall call his "self-interest.” Rational maximization should not be confused with conscious calculation. Economics is not a thoery about consciousness. Behavior is rational when it conforms to the model of rational choice, whatever the state of mind of the chooser.(...) Nor is perfect rationality assumed; rational-choice thoery allows us to assume that rationality is "bounded” because of human cognitive limitations, although another way to think of those limitations is as costs of absorbing and using information.
Richard Posner
I think the basic misconception is to speak of the so-called "best” allocation of resources. What is the best? In common economics it is defined as what would be if we knew everything. Economists operate with the fictitious assumption that all the relevant data is known, but this is totally unrealistic. Nobody knows all the data. What we have is widely dispersed knowledge, which cannot be concentrated in one mind. To call the situation-which would use all the knowledge available-"optimal” is nonsense because it is by definition a non-achievable solution. Our problem is not the full utilization of all knowledge but the best use we can achieve with any known institutional structure. In that sense, some oligopolistic (and even monopolistic situations), represent the best possible utilization of knowledge that we can achieve. Even the action of a monopolist can be extremely beneficial.
Friedrich Hayek
Keynes didn't make an all-out assault on Economic Man, but he often resorted to plausible psychological theorizing rather than careful analysis of what a rational decision-maker would do. Business decisions were driven by "animal spirits,” consumer decisions by a psychological tendency to spend some but not all of any increase in income, wage settlements by a sense of fairness, and so on.
But was it really a good idea to diminish the role of Economic Man that much? No, said Friedman, who argued in his 1953 essay "The Methodology of Positive Economics” that economic theories should be judged not by their psychological realism but by their ability to predict behavior. And Friedman's two greatest triumphs as an economic theorist came from applying the hypothesis of rational behavior to questions other economists had thought beyond its reach.
Paul Krugman