Comments on: Does Transaction Cost Economics Need Opportunism?

By: Chris Bell

Chris Bell — Mon, 30 Mar 2009 01:09:49 +0000

Given the explosion of interest in behavioral and neuro-economics over the past decade, could it be that at some point in the near future a similar argument will be made about bounded rationality?

Thinking about this question may shed light on the heat Peter’s question generated a generation ago!

By: Vic Fleischer

Vic Fleischer — Fri, 06 Oct 2006 16:51:02 +0000

Great post, Peter. I always liked the formulation that “not all people are saints all of the time.” But I need to think more about whether this means opportunism or just self-interest vs. altruism.

By: Peter Klein

Peter Klein — Fri, 06 Oct 2006 15:33:49 +0000

Joe, you shouldn’t believe everything you read, especially by authors of this blog!

Seriously, I think we are saying the same thing. My point is that opportunism is not conceptually different from self-interest, but is simply self-interest in situations where the rules of the game are endogenous, or where agents can choose whether to obey them. The underlying behavioral assumptions are the same, we have simply expanded the set of margins over which the agent can optimize. In this sense, opportunism refers to a different application of the economic model of behavior rather than a distinct behavioral model. And, as you point out in your first paragraph, the point is not to formulate behavioral assumptions per se, but to explain the existence of safeguards.

By: Joe Mahoney

Joe Mahoney — Fri, 06 Oct 2006 15:03:13 +0000

Opportunism entails “playing outside the rules of the game.” For example, some people embezzle funds and some people rob banks (because that is where the money is). Therefore, the amount of safeguards needed is much greater than one might imagine under assumptions of “mere” self-interest, where it is assumed that folks play by the rules.

Thus, for the FULL implications of transaction costs economices to be realized, the assumption of opportunism is necessary. For example, see Nicolai Foss’ (1996) article in ORGANIZATION SCIENCE: “Knowledge-Based Approaches to the Theory of the Firm: Some Critical Comments” Volume 7, issue 5, pp. 470-476, which persuasively maintains that the assumption of opportunism is essential.