Auctions in an outcome-based payment scheme to reward ecological services in agriculture – Conception, implementation and results



his work “Transaction-Cost Economics: The Governance of Contractual Relations”
(Williamson, 1979) he identified the critical dimensions of characterising a transaction and
links these to the institutional governance structures of transactions. The three principal
dimensions to describe a transaction are, the frequency of exchange, uncertainty and the
degree to which investments are transaction-specific. Finally Williamson concludes that
non-specific transactions are efficiently organised by markets, while recurrent transaction-
specific exchanges could be organised more efficiently governed internally.

In Wallis and North’s 1986 article “Measuring the transaction sector in the American
economy, 1870-1970” the first effort to measure economy-wide transaction costs was
launched. Wallis and North measured the size of the so called “transaction sector”. They
divided the whole economy in two parts, the transaction and the transformation or
production sector and measured the total value of resources used in the transaction sector.
In this analyse only the transaction costs floating through the market were captured. But
the so called non-market transaction costs, such as spending time in waiting, filling out
forms, gathering information and so on are critically important to analyse and understand
the economy. Research on non-market transaction costs has been accomplished for
example by Dagino and Farina (1999), de Soto (1989) or Alexandra and Lee Benham
(1998).

Finally the very diverse group of economists dealing with transaction costs in Ecological
and Environmental Economics should be mentioned in this context. Here the transaction
costs in the working of emission trading and the use of incentive mechanisms in
environmental protection in general are focused (Solomon, 1999; Tietenberg, 2002).

Especially through the work of Williamson, the transaction cost economics became one, if
not to say the core field of the New Institutional Economics, so named because it provides
a theoretical framework and emphasis of testability to the institutional traditions of
Commons and Veblen. Williamson therefor is considered the founder of this literature,
both in terms of vocabulary and content and also he is one of the strongest proponents of
applying the notation of transaction costs. After all, there should be no doubt, that
transaction costs do exist and do matter. Despite the voluminous literature in the new
institutional economics, a theoretical consensus on what transaction costs are, is still out of
sight (e.g. Allen, 1991; Allen, 2000).



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