The F-Connection: Families, Friends, and Firms and the Organization of Exchange

Abstract

The identity of the people engaged in a transaction is a major determinant of the institutional mode of transaction. The family is the locale of transactions in which identity dominates; however identity is also important in the market. The opportunity to reduce transaction costs by making specific investments in exchanges between identified parties affects the organization of social activity the division of labor and in particular the interaction between specialization by identity and by other dimensions of transactions. Economic and social development can be understood in terms of changes in the modes of transacting. Within this broad framework one can also analyze the transactions in which families have an advantage over other institutions the conditions that make families of various types more or less efficient than alternative modes of transaction and the implications of family membership for transactions with others. (authors)