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A form of government organization from the perspective of transaction cost economics

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  • Steven Kan
  • Chun-Sin Hwang

Abstract

Taking the approach of the superfirm, we characterize government organization through six different features. First, citizens are viewed as sovereign owners of a superfirm; elected officials are employees of the sovereign citizens. Second, in analogy to the economic principle of the division of labor and specialization, a division of labor between five independent branches of government is advocated: the legislative, the budgetary, the executive, the law enforcement, and the judiciary branch. Third, we do not suggest a mechanism of checks and balances between government branches but deal with the threat of tyranny using the principle of separation of decision control and decision management developed by Eugene Fama and Michael Jensen. Fourth, with election as a decision control device, we demarcate the constituency of the budgetary branch by age groups to provide an explicit control mechanism for intertemporal and intergenerational trades. Fifth, to strengthen sovereign citizens' decision control, the powers to recall elected chief public servants, to declare emergency and war, to sign into international treaties, and to amend the constitution are vested with a national assembly. Sixth, there is no head of state. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Steven Kan & Chun-Sin Hwang, 1996. "A form of government organization from the perspective of transaction cost economics," Constitutional Political Economy, Springer, vol. 7(3), pages 197-219, September.
    • Handle: RePEc:kap:copoec:v:7:y:1996:i:3:p:197-219
    DOI: 10.1007/BF00128162
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    References listed on IDEAS

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    1. Pagano, Ugo, 1991. "Property Rights, Asset Specificity, and the Division of Labour under Alternative Capitalist Relations," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 15(3), pages 315-342, September.
    2. Weingast, Barry R & Marshall, William J, 1988. "The Industrial Organization of Congress; or, Why Legislatures, Like Firms, Are Not Organized as Markets," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 132-163, February.
    3. Brennan, Geoffrey & Buchanan, James M., 1977. "Towards a tax constitution for Leviathan," Journal of Public Economics, Elsevier, vol. 8(3), pages 255-273, December.
    4. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    5. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
    6. Rosenberg, Nathan, 1976. "Another Advantage of the Division of Labor," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 861-868, August.
    7. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    8. Charlotte Twight, 1988. "Government manipulation of constitutional-level transaction costs: A general theory of transaction-cost augmentation and the growth of government," Public Choice, Springer, vol. 56(2), pages 131-152, February.
    9. Albert Breton & Galeotti Gianluigi & Pierre Salmon & Ronald Wintrobe, 1991. "The Competitive State," Post-Print hal-00445590, HAL.
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    1. Henk ter Bogt, 2003. "A Transaction Cost Approach to the Autonomization of Government Organizations: A Political Transaction Cost Framework Confronted with Six Cases of Autonomization in the Netherlands," European Journal of Law and Economics, Springer, vol. 16(2), pages 149-186, September.

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    Keywords

    H11; L22;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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