Local governance: The relevance of transaction cost economics

Abstract

Only relatively recently have the implications of transaction cost economics (TCE) for local governance been appreciated. TCE appears to offer a weapon against fragmentation. This paper uses contracting for social housing management to illustrate the possibilities. However, TCE has attracted considerable criticism both inside and outside economics. Any analysis seeking inspiration from TCE should be informed by an understanding of the central critical concerns. This paper suggests that TCE currently offers limited assistance to the analysis of local service organisation. Analysis of local governance which seeks inspiration from the economics literature must move beyond TCE to more institutionally sensitive approaches.