Political Process,Transaction Cost and Governance Mechanism: Analysis of the Transaction Cost in the Process of Policy Making

The process of policy making,a political process in reality,is abundant with transaction cost because of the information asymmetry,opportunism and asset specificity among parties of political transaction.Transaction cost theory of economic analysis can be helpful to the development of the framework for analyzing the transaction cost in the process,to the differentiation of the formation of transaction cost of the process and decreasing it,to the understanding of policy making and to the possibility of micro-analysis of the politics.The reason lies in the fact that one must realize that policy making is restricted by many kinds of transaction costs whenever he or she wants to evaluate current policy,normatively appraise different policies or recommend alternative policy,and so on.Such transaction costs can affect the efficiency of policy making and,in the end,policy making is more like a political game among participants(principals) who try to influence the activities of policy makers(agents) than a technical or calculating problem.Policy is the result of the equilibrium of political game.