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Transaction Costs, Social Costs and Open Systems: Some Common Threads

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  • Vladislav Valentinov
  • Lioudmila Chatalova

Abstract

The present paper draws upon the open systems perspective to identify the common systems‐theoretic core of two schools of modern economic thought, the new institutional economics and the heterodox institutionalism. This core is shown to be in the argument that the maintenance of complexity requires appropriate self‐regulatory mechanisms. While the new institutional economics focuses on the technological complexity maintained by corporate hierarchies, the heterodox institutionalism is concerned with the civilizational complexity that needs to be maintained by broader self‐regulatory institutions of the public and nonprofit sector. This argument highlights the complementary and paradoxical relationship between the concepts of transaction costs and social costs analyzed by the respective schools. Corporate hierarchies may successfully exercise their self‐regulatory role by economizing on transaction costs, yet in doing so they generate social costs that are reducible through the self‐regulatory activity of public and nonprofit institutions. Copyright © 2013 John Wiley & Sons, Ltd.

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  • Vladislav Valentinov & Lioudmila Chatalova, 2014. "Transaction Costs, Social Costs and Open Systems: Some Common Threads," Systems Research and Behavioral Science, Wiley Blackwell, vol. 31(2), pages 316-326, March.
    • Handle: RePEc:bla:srbeha:v:31:y:2014:i:2:p:316-326
    DOI: 10.1002/sres.2204
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    4. Ngui Min Fui Tom, 2019. "Strategy to Build a Transshipment Port as a Catalyst to Achieving Critical Mass for Sabah’s Economic Growth," International Business Research, Canadian Center of Science and Education, vol. 12(7), pages 141-166, July.
    5. Valentinov, Vladislav & Hielscher, Stefan & Pies, Ingo, 2015. "Nonprofit organizations, institutional economics, and systems thinking," Economic Systems, Elsevier, vol. 39(3), pages 491-501.
    6. Vladislav Valentinov & Stefan Hielscher & Ingo Pies, 2016. "Emergence: A Systems Theory’s Challenge to Ethics," Systemic Practice and Action Research, Springer, vol. 29(6), pages 597-610, December.
    7. Vargo, Stephen L. & Koskela-Huotari, Kaisa & Baron, Steve & Edvardsson, Bo & Reynoso, Javier & Colurcio, Maria, 2017. "A systems perspective on markets – Toward a research agenda," Journal of Business Research, Elsevier, vol. 79(C), pages 260-268.
    8. Valentinov, Vladislav, 2015. "From equilibrium to autopoiesis: A Luhmannian reading of Veblenian evolutionary economics," Economic Systems, Elsevier, vol. 39(1), pages 143-155.

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