ABSTRACT
Transaction costs is the central notion of new institutional economics (NIE). One of the major reasons for this situation is that the question of whether transaction costs are universal or relative for human society has not been properly considered. Narrow transaction costs include only costs concerning market transactions. Thus, transaction costs will not exist if there are no economic transactions between individuals or groups. New institutional economics adopts the bounded rationality hypothesis rather than the completed rationality hypothesis adopted by neoclassical economics. Like various other economic costs, transaction costs are a kind of opportunity cost. This means that transaction costs are a product of the allocation of scarce resources among alternative uses and are prices paid for achieving some particular ends. Transaction costs are a kind of opportunity cost, which means that transaction costs are imaginable only in a world of scarcity. Scarcity means that economists generally assume to be infinite, resources are always finite, and so selection is necessary.
