Transaction Costs and the Progress of Humanity
The progress of humanity is the story of the ongoing reduction of transaction costs.
by Steven Horwitz
January 3, 2018
The progress of humanity is the story of the ongoing reduction of transaction costs.
For me, that sentence captures the essence of humanity’s climb out of centuries of poverty and ignorance to the more enlightened and materially comfortable world of the 21st century. It’s a simple sentence, but the ideas behind it need to be unpacked to see how powerful its argument really is.
Human Progress and Getting What We Want
To understand that argument, we need to step back and understand how economists look at wealth. For good economists anyway, wealth refers to the things we value, and increases in wealth simply mean that people are getting more of the things they value. Consistent with the subjectivism of modern economics, this definition does not specify what it is that people do, or should, value. What we value is up to us, whether those are material goods or things like peace and quiet, love, meaningful employment, or anything else t…
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