87-year-old Nobel laureate in economics, Williamson, dies: Name of "New Institutional Economics"
Should airlines also run travel companies? Do car manufacturers also have to build steel plants? Do steel companies have to buy iron ore? All these issues can be analyzed and predicted using transaction costs.
On May 23, a reporter from www.thepaper.cn learned that Oliver E. Williamson, the 2009 Nobel Prize winner and founder of transaction cost theory, was in May 2020 local time. He died on the 21st at the age of 87.
The University of California, Berkeley, Haas School of Business (Haas) announced the news on its social media.
Oliver Eaton Williamson was born on September 27, 1932 in Superior, Wisconsin, USA. He graduated from the Massachusetts Institute of Technology in 1955 and received a doctorate degree in economics from Carnegie Mellon University in 1963. He later served as a professor at the University of California, Berkeley, and a member of the American Academy of Sciences and the American Academy of Arts and Sciences.
Williamson's main academic contribution was the creation of "Transaction cost theory" (Transaction cost economics), and also the name of "new institutional economics". He concretized the concept of "transaction cost" and made it an important analytical tool for institutional economics, thereby transforming descriptive institutional economics into a predictable and verifiable "new institutional economics."
Williamson won the Nobel Prize in Economics with Elinor Ostrom in 2009. In a statement from the Royal Swedish Academy of Sciences, Williamson introduced that Williamson ’s special analysis of economic governance "Analysis of the company's boundary issues" and won the award.
Williamson inherited the theory of Ronald Coase, a representative of the Chicago School of Economics, and was hailed as the rediscovery of the "Coase Theorem". It is precisely because of Williamson's work that Coase's transaction cost theory has become a new force in modern economics, and gradually developed into a new branch of contemporary economics.
According to Qian Yingyi, a professor at Tsinghua University, from the 1930s, when Coase proposed the concept of transaction costs, until the 1960s, not many people followed up. The main theme of economics is still to study market mechanisms and price mechanisms. In the 1970s, through Williamson's related research, Coase's related theories became economics.
In short, Coase explored the necessity of "company" in the market. Coase Theorem believes that as long as the transaction cost is zero, no matter how the initial property rights are defined, it will not affect the allocation of resources by the market mechanism. However, the reality is that transaction costs cannot be zero, so an organization such as a "company" was born.
In the book "The Nature of the Enterprise", Coase raised the question of why some activities are carried out within the enterprise while others are carried out in the market. His answer is that when transaction costs exist, it is cheaper to engage in certain activities within the enterprise. This is the reason for the existence of the enterprise.
Williamson is the leader of the new institutional school. The so-called new institutional economics is the analysis of institutional economics using mainstream economic methods, and "transaction costs" is the most basic concept of new institutional economics. Coase believes that transaction costs should include the cost of measuring, defining, and protecting property rights, the costs of discovering transaction objects and transaction prices, bargaining, contracting costs, and the cost of urging strict performance of contract terms.
"Why did he start a new institutional economics? Institutional economics existed for a long time, but institutional economics didn't have much vitality until Professor Williamson, because it lacked analysis and more description. This It is a flaw of the old institutional economics. "Qian Yingyi said at a seminar," It is very important that Williamson analyzed where the boundary between the enterprise and the market is and what factors determine it. "
Williamson believes that property rights theory mainly studies the institutional environment or game rules, while transaction cost theory studies the specific governance system or the realization of specific games. Therefore, compared with the property rights theory, the research unit of transaction cost theory is more micro and specific.
From the perspective of transaction cost theory, due to the limited rationality and opportunism of individuals, the transaction contract is always incomplete, and it will lead to the inefficiency of specific investment beforehand and the inadaptation to the new environment afterwards. Cooperation efficiency. Therefore, a certain governance model must be adopted to improve transaction efficiency.
In simpler terms, why is transaction cost so important? Because it is assumed that there is no transaction cost, no enterprise is needed at all, and all transactions can be completed in the market. Therefore, transaction costs are very important. But the key to the problem lies not only in the conception but also in the concrete and practical analysis.
Williamson's three representative works are "Markets and Bureaucracy" (1975), "Capitalist Economic System" (1985), and "Governance Mechanism" (1996). In the "Capitalist Economic System", Williamson specifically examined various major economic systems of capitalism, including market organization and restrictions on the market, work organizations, trade unions, modern companies, corporate governance structures, monopolies and antitrust and Government supervision, etc., put forward the core issue of economic organization is cost savings.