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"Micro-Phase 1 - 6" on transaction costs (below)


Lecture 1 Concept and Structure: What is microeconomics studying?

Section 6: Talking about transaction costs (below)

Zhang Wuchang mentioned a lot of transaction costs in his "Economic Interpretation", but he is not satisfied with the "transaction cost" translation (English is the transaction cost), because he believes that transaction costs have a broader and deeper meaning.

In "On Transaction Costs (I)", we mentioned two types of transaction costs, one is the transaction cost including search, comparison, transportation, logistics, etc., and the other is because of the transaction cost generated by the "contract" - In these two categories, Zhang Wuchang tends to call it "transaction costs." In this article, we will talk about the third category together - because of the transaction costs generated by the "resource allocation mechanism" - Zhang Wuchang tends to call it "institutional expenses."

3. “ Institutions must have transaction costs

Regarding "institutional expenses," Zhang Wuchang believes that any mechanism for allocating resources, whether it is a price mechanism or a non-price mechanism, necessarily corresponds to a kind of "institutional cost", and which mechanism people will choose depends on Under the specific realistic conditions, which one is the lowest in “institutional expenses”.

For example, people use the price mechanism to configure most of the goods in their lives, but the seats in the classroom often use the non-price mechanism of “who is going to pick who is early” – because the “institutional cost” brought by the price mechanism is too high. Exceeded the increase in the results of its configuration. As mentioned above, the resource allocation within the enterprise is based on the non-price mechanism. It is also because the enterprise as a whole, the entrepreneurs to arrange production plans and personnel compensation, the "institutional costs" will be greatly reduced.

If the country is regarded as a huge enterprise, although most of the resources are allocated within the country using price mechanisms, such as government civil servants, public security bureaus, courts, procuratorates, the military, etc., their positions and salaries are often not so “Marketing,” and they are important players in maintaining the “price mechanism” throughout the country. Therefore, from the perspective of transaction costs, their compensation can be regarded as the transaction cost of the price mechanism of other resources. This part of the salary is derived from taxation. Therefore, for a country, its price mechanism How much the system costs can be reflected to some extent as the tax.

On the other hand, in addition to the explicit performance of taxation, the “value dissipation” caused by imperfect mechanisms and inaccurate incentives can also be understood as a hidden “institutional cost”. For example, after China adopted the contract responsibility system in rural areas in the past, the peasants' enthusiasm was more sufficient and the output increased. It also meant that the mechanism before that led to a large number of “the value of the output should be dissipated”, which is actually “ Institutional costs." Similar examples include the phenomenon of “official down” [1] , “lazy politics”, and “going back door” that have appeared or are appearing in China .

In fact, if we look farther and return to the feudal era, which relied heavily on the emperor and the entire bureaucratic system to allocate resources, because of the backwardness of business, the lack of price mechanisms to allocate resources, and the value of a large number of outputs should be dissipated. Moreover, the management cost of the feudal bureaucratic system has risen with the increase of the population. In order to maintain the rule, the tax burden has become more and more serious, and it will eventually collapse, war and change the dynasty.

So, in theory, if a country’s government is “big”, because its management costs grow exponentially with the size of the country, it faces greater institutional costs – reflected in higher taxes, and More inaccurate, less motivated value dissipation. However, if a country can quote the price mechanism as comprehensively and in-depth as possible, first of all, it can greatly reduce the cost of maintaining the operation of the entire mechanism (the government only acts as a “night watchman”). Second, the price mechanism can largely maintain the accuracy of the incentive. And sufficient, reducing the value of dissipation, so that the total output of the entire country is increased, so that the people can enjoy more wealth.

In this regard, our country has achieved certain results. Of course, there is still a long way to go. It is not easy to do this. It depends on the advancement of science and technology, the innovation of enterprises, and the awareness and determination of the government. However, because of the scarcity of resources, and the desire and opacity of the human heart, it often causes a large amount of value to be dissipated in the "battle". This is the transaction cost of human society.

4. Summary

From the discussion of the three types of transaction costs, we can see that “transaction cost” is a broad concept, which is reflected in many levels: from the cost of finding, comparing, transportation, logistics, etc. in a single transaction, to bargaining, entering into The cost of contracting and guaranteeing the effectiveness, to maintaining the cost of operating a system, to the value dissipation of a system because of imperfections, inaccurate incentives or inadequacies, can all be understood as transaction costs.

In fact, the transaction cost at the last level is the most essential feature, as Zhang Wuchang pointed out in the Economic Interpretation: Although it is called “transaction cost”, it is not limited to “transaction” and The "price mechanism" is essentially a value dissipation.

According to this idea, the purchase of food is to get the energy to sustain life, then the time to walk, queue up and settle the time is the transaction cost, even the time to cook and eat is the transaction cost; see the online open class is to get knowledge Then, if the video is dragged, it is better to see the article to get the dry goods faster, and the extra time is also the transaction cost.

Transaction costs are ubiquitous because the dissipation of value is ubiquitous—all the links that are not directly related to achieving the goal are value dissipation and transaction costs. Isn't that sad? So how can we minimize transaction costs and achieve “fishing” of dissipative value? Obviously, the first is to "focus", to save unnecessary links as much as possible, go straight to the goal, the so-called "less do useless work"; secondly, don't "too focused", don't forget to hold a state of mind to enjoy the process, The time of eating may be the value of being dissipated, but if you consider the happiness of tasteful food, it is not; third, make proper use of the value that is dissipated, such as inserting advertisements into the pages of the online open class video. It is the value of the platform side in salvaging.

Zhang Wuchang said that the cost that does not exist in a person's world is the transaction cost. My understanding of this sentence is: because there is only one person who does not need to "configure resources", even if it is two people, because people's desires are infinite and resource differences, resources are scarce, and they need to be configured. At this time, regardless of the mechanism, there will be transaction costs. Understanding the transaction costs, there is an additional perspective on the world.

[1] Under the dual price system, officials use their power to use the two levers of parity and market price (bargaining) to make money.