ABSTRACT
Transaction cost analysis entails an examination of the comparative costs of planning, adapting, and monitoring task completion under alternative governance structures. If transaction costs are positive, or high, the free interaction of people on the market, given a certain initial allocation of property rights, does not automatically maximize production. In Ronald Coase view, transaction costs seem to be just the right theoretical instrument to shed light on the matter. In the world of zero transaction costs the free interaction of people on the market, whatever the initial allocation of property rights, always maximizes wealth. Ronald Coase provided what, from the point of view of Austrian economics, could be an adequate theory of the firm. Thus, he claims that "firm, therefore, consists of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur".
