implicate the participation of the local population’s preferences for botanical diversity.
From an economics point of view the payment scheme puts a special focus on an efficient
achievement of ecological objectives, which are defined as ecological goods (Fischer et al.,
2003). In this paper the concept and its components will be described and beyond that, the
results of the first auction and two surveys with the focus on the farmer’s transaction costs
in the model-region will be presented. Finally conclusions will be drawn as far as possible
at that time.
2. Transaction Costs
First a brief overview of the development of the transaction cost economics and their
theoretical foundation will given. Since Adam Smith economists have been inspired by the
idea, that the price mechanism is able to coordinate the division of labour and trade in a
society like an “invisible hand” (Smith, 1776). Almost two centuries later economics did
begin to realise, that the working of the price mechanism is costly and that something like
transaction costs do exist. In 1937 Ronald Coase started to introduce first conceptual
thoughts about transaction costs in his paper “The Nature of the Firm” and build up the
historical starting point of the transaction costs economics. He argued that firms should be
conceived as entities endogenous to the economic system and whose existence is justified
only in the presence of transaction costs to production. Firms and other economic
organisations and institutions, in effects, exist because agents find it an useful manner of
minimising transaction costs. But he failed to give a more detailed definition of transaction
costs and called them simply “the costs of using the price mechanism”. The second famous
work of Ronald Coase to be mentioned in this context is of course “The Problem of Social
Costs” (1960). Coase discusses solutions of the problem of negative externalises. Contrary
to Pigou’s theory that only governments can "internalise" externalities in economic
exchange or production by means of taxes and subsidies (Pigou, 1932), Coase argued that
when one considers opportunity costs in its full meaning, no such devices are necessary,
because in the absence of transaction costs, the allocation of resources is independent of
the distribution of property rights. This connection between transaction costs and property
rights became famous as the “Coase Theorem”, although Coase never used that term.
Oliver E. Williamson picked up Coase’s ideas in early 1970s and started the second body
of work on transaction cost economics (e.g. Williamson, 1975, 1979, 1985, 1996, 2000). In