The perception and measurement of transaction costs

The paper discusses various explanations of how transaction cost-minimising corporate configurations come about. It contrasts Darwinian with rational explanations, finding both unsatisfactory. What matters, rather than computation of fully recognised transaction costs, are managerial perceptions of transaction costs. These perceptions are not expressed in numbers, but in language. This is related to arguments derived from bounded rationality and from transaction cost economics. The paper argues that issues of managerial perception must become central to analysis. Existing academic traditions which accord primacy to perception and to language are drawn upon, and argued to be of great relevance to future work.