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by perl4ever 2221 days ago
When transaction costs are too high for transactions to be made that would improve society, the losses don't somehow get made up. You have a lot of produce or something, and you can't get it transported to the people who could use it, and it gets trashed, that's permanently lost.

It seems wrong to me to dismiss this as "taking longer to reach equilibrium", as though you get to the same destination either way. Perhaps you are interpreting "function" in a loose manner, but of course I didn't mean "function" = merely "do something".
1 comments
pdonis 2221 days ago
> You have a lot of produce or something, and you can't get it transported to the people who could use it

And why not? "High transaction costs" doesn't seem like a viable explanation in a world where goods constantly get shipped around the world at extremely low cost per unit. Something more like "some stupid government regulation is preventing common sense from being applied", or "corrupt officials are stealing stuff instead of letting it get sold on the open market" seems much more likely.

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perl4ever 2220 days ago
Because you don't have a truck?

And maybe you don't have a truck, because there are no roads.

And there are no roads, because there is no nearby marketplace.

And there is no big market, because there is nobody with capital to invest in that.

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pdonis 2219 days ago
I'm not sure what you're talking about, since in countries which have these attributes, nobody is producing anything that would require trucks to transport, so your hypothetical of someone having a lot of produce that they can't get to people who need it doesn't apply.

If you are simply saying that there are countries which are poor because there is nobody with capital, first, that's still not a problem of "high transaction costs", it's a problem of lack of capital. And second, the problem isn't even lack of capital, since there are plenty of people in rich countries who would be glad to invest capital in poor countries--if the corrupt governments of those poor countries weren't going to steal everything of value that got invested. So we're still looking at a problem of government corruption, not "high transaction costs".

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perl4ever 2219 days ago
Government corruption is exactly "high transaction costs". I mean, what is the stereotype of a poor corrupt country, but one where you have to bribe someone to get anything done?
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