I think what Peter says on pp. 440-42 of the paper he cites is quite sensible. But it does point up the equilibrium nature of comparative-institutional analysis and the (at best) ad hoc account of economic change in Williamson. (Which does not, of course, make comparative-institutional analysis invalid or inappropriate in many circumstances.) Quite a long time ago, Jon Elster (Explaining Technical Change, Cambridge, 1983) took Williamson to task for not having a real background theory of the process that makes us think observed organizational forms are even relatively more efficient than other real or imagined alternatives. As Peter suggests, Williamson’s response was in the “as-if” vein. My point in the slide, and in much of my writing in general, has been that there may be real payoff from actually looking at the evolutionary process that gives rise to, and constantly changes, organizational form.

Transaction costs theory emphasizes that organizational innovation is always possible, and that at any moment in time we have a comparative assessment of imperfect governance alternatives.

Transaction costs theory does not seem to claim that we ever can be complacent that what currently is, “is the best, in the best of all possible worlds.” In fact, transaction costs theory suggests that holding such a posture would be injudicious..