ABSTRACT
In 1937 Ronald Coase published a short article called 'The Nature of the Firm'. Neo-classical economics has various explanations why this so (market concentration and power, variable efficiency, ease of entry and exit); Coase added another set of 'market imperfections' to this list, which can be summed up in the phrase 'transaction costs'. Coase's work lay little noticed for several decades. It was rediscovered in the 1970s, and was rapidly grown into something called 'the new institutional economics', this has come to dominate the economic analysis of organisations, and an octo-genarian Coase received a belated Nobel prize for his work. The central argument of transaction cost theory is a simple one, which echoes a basic tenet of the Market model: organisations will choose whichever transaction costs are lower. As will become apparent, costs are tricky things, no less so for firms in transaction cost analysis than for actors in the Market model.
