ABSTRACT
This chapter examines the definitions and premises underlying the concept of bargain, upon which theories of transaction costs such as R. H. Coase’s are predicated. The Coase theorem thus accepts the rational two-party bargain as the basic unit of social welfare and treats this plateau of two-party bargaining as the potential measure, or definition, of social cost. The problem remains of the derivation of an established threshold of trust or enforcement— in short, society— for a relation cannot be logically derived from subjective individual rationality, but requires a comprehensive social rationality. The basic relation in terms of which bargaining takes place is socially derived and involves limits and guidelines which keep it consistent with social goals. A last view is of interest because it specifically calls into question the premise of rationalism upon which most arguments are based which attempt to derive a social compact from bargaining among rational individuals.
