This chapter addresses the history, use and significance of the term transaction
costs. Few words in the economic language have been more abused or fought over and
this is shown to result from the emergence of two distinct definitions and uses.
The Neoclassical definition rests on the costs of trading across a market, while
the property rights definition centers on the costs of establishing and enforcing
property rights. In articulating these two separate definitions and in demonstrating
their relationship and separate uses, it is hoped that more progress can be made
in the field of transaction cost economics.
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