Of Transactions and Transaction Costs: Uncertainty, Policy, and the Process of law in the Thought of Commons and Williamson
Oliver Williamson regularly makes comparisons between his work and the work of John R. Commons (Williamson 1975, xi, 3, 6, 24, 254; 1985, 3, 6; 1996, 12, 26, 220-221, 251; 2000, 599). Williamson bases his claims on two significant points: First, his transaction cost economics (TCE) takes the transaction as the central unit of economic behavior and, second, in TCE the transaction contains elements of conflict, order, and dependence (1985, 3; 1996, 12; 2000, 599). With regard to these points Williamson's claim is correct-these are points of similarity in his and Commons' work-however, as this paper will show, these similarities are largely superficial. The similarities are superficial because they are based on different conceptions of how legal process and enforcement ought to work in the face of uncertainty-arguably foundational issues. This paper argues that these differences logically require very different economic theories and different results when applied to economic policy. There have also been several comparisons of Commons' work with that of Williamson's in the secondary literature. William Dugger (1983), Steve Medema (1992), and Yngve Ramstad (1996) have all compared aspects of Commons' work with Williamson's. These works focused on important differences in areas of Commons' and Wil-