Transaction Costs and Security Institutions

Abstract

The framework of this book builds on historical-institutionalist thought, which regards institutions as based on their capacity to reduce the costs of cooperation. It takes virtually the reverse of this idea as a point of departure and conceptualises the impact of transaction costs on preferences for building the institutions in the first place. I demonstrate how governments prefer precisely those institutional arrangements that adapt best to the different transactions in which they are engaged in European security architecture. In other words, preferences are ‘driven’ by governments’ attempt to adjust institutions to transactions, which differ principally in their attributes (that is, uncertainty and asset specificity). I then develop a mid-range theoretical explanation, which builds on, but modifies, liberal–institutionalist thought. While the study of security preferences can be seen as an input to liberal theorising, the chosen perspective through the lenses of transaction costs contributes directly to the institutionalist research programme (e.g. Moravcsik 1997: 537).¹