Exchange Configurations and the Legal Framework

Abstract

This chapter explores the idea of “exchange configuration,” which allows a detailed analysis of various forms of exchange in different settings and at different levels of aggregation or disaggregation in developing and developed countries alike. This approach aims to identify the very building blocks of transactions and to explain how transactions obtain their form and content. It should be emphasized that one of these building blocks and key determinants affecting the form and content of transactions is the prevailing legal framework, which can vary enormously across different settings. The chapter begins by discussing some alternative approaches to the exchange process. Briefly summarizing important prior developments, such as New Institutional Economics and Transactions Cost Economics, it examines the role of law and regulation for tackling not just market failures (such as the inadequate provision of public goods and our inadequate handling of the environment) but also equity and income distribution.