In general terms, transactions costs are the costs that arise when individuals exchange ownership rights to economic assets and enforce their exclusi… - Þráinn Eggertsson

Let us define institutions as sets of rules governing interpersonal relations, noting that we are talking about formal political and organizational practices.

Without the state, its institutions, and supportive framework of property rights, high transaction costs will paralyze complex production systems, and specific investments involving long-term exchange relationships will not be forthcoming.

In 1984, I set out to investigate whether my demand for institutional analysis had created its own supply, whether the thesis of institution-free economics had created its antithesis. My working rule was to limit the study to contributions that did not alter the core of the economic approach, particularly the rational-choice model, and to seek a new synthesis of neoclassical and institutional economics. Neoinstitutional Economics is the term I use.