The f-connection: families, friends and firms and the organization of exchange

Yoram Ben-Porath

Expert InsightsPublished 1978

The identity of the people engaging in a transaction for allocating and distributing resources is a major determinant of the institutional mode of transacting. The way in which members of families have dealings with each other, the implicit contract by which they conduct their activities, stand in sharp contrast to the textbook market transaction. Investment of resources specific to a relationship between identified parties (friends, business partners, employers and employees) can save transaction costs and stimulate trade. The author discusses the role of identity and sketches a framework in which fixed and specific costs that save the cost of transactions affect the organization of social activity, the division of labor and the interaction between specialization by identity and by other dimensions of transactions. This framework links various aspects of economic and social development to changes in the mode of transacting, that is, to the shift in the border lines between the various types of market and nonmarket modes.

Document Details

  • Copyright: RAND Corporation
  • Availability: Web Only
  • Year: 1978
  • Pages: 78
  • Document Number: P-6323

Citation

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Ben-Porath, Yoram, The f-connection: families, friends and firms and the organization of exchange. Santa Monica, CA: RAND Corporation, 1978. https://www.rand.org/pubs/papers/P6323.html.
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