A Transaction Cost Theory of Planning

Abstract

Traditional explanations of planning assume a dichotomy between the public sector and the free market, associating planning with government intervention. The transaction cost theory of planning offers an alternative account of planning in both the public and private sectors. Extending economic transaction cost theory into the public and the interorganizational domains suggests that markets — both economic and political — do not need planning; planning is associated with nonmarket hierarchical forms of organization and organizational systems. Implications cover the scope and limits of planning, the link between planning and implementation, and relationships between planning and organizational structure.