Transactions cost

It seems strange but for most of its life, economics was a field of study that did not recognize transaction costs. Look at the 200-year Ngram results, below. Ronald Coase changed things. Without him, we would be stuck with Nirvana economics, still teaching things that students could easily see are not terribly useful or linked to the world they know. Today's NY Times includes "Is Owning Overrated? The Rental Economy Rises." The report speculates about cultural shifts in attitudes and the effects of the recession. But it also mentions, "... technology has made borrowing possible on a broader scale, and between strangers. Social networking profiles and rating systems offer a level of trust and verification, and mobile phones equipped with GPS take much of the work out of matching people with nearby services." It is the money, and the trust, and the attitudes, and the possibilities. Tech is changing the world in profound ways. And in ways that conventional measures, including GDP, cannot be counted on to capture. We get better use of the resources and capacities we have. This can go a long way.


ADDED: Here is the econtalk discussion of AirBnB. Listen to the story -- and hear about the numbers.