Technology in New Institutional Economics—Comparison of Transaction Costs in Schumpeter’s Capitalist Development Ideology

Abstract

In mainstream economics (the neoclassic economics), it is accepted that every company that competes under the perfect competition market has the same technological equipment. So, technology is approached as a simple efficiency increase whose source is unknown. In terms of established economics view, technology is like a "black box" that cannot be predicted. As the creator of the concept of "creative destruction", Joseph Schumpeter (1883-1950) caused significant changes in terms of the view of neoclassical economics about technology. On one hand, Schumpeter created a new point of view about the concept of "innovation" by using key concepts, such as "invention", "imitation", and "business cycles". Schumpeter's "creative destruction" concept carries out the role of a new map for the new institutional economics trend which accepts "technology" as an institution. On the other hand, if one is to understand why the ideology differs between neoclassical economics and new institutional economics, "transaction costs" should be analyzed. Since, transaction costs and creative destruction have a relationship between each other; Schumpeter and Coase's ideas are resembling each other. While doing this, this paper will try to discuss the question of how to accept the technology as "external" instead of "internal" limit neoclassical economics. In this process, it will primarily base the dimension on the concept of "technology" developed by Schumpeter. The second station is an inquiry betwen Schumpeter's and Coase's ideas about technology. Although new institutional economics (NIE) and neoclassical economics can be confused, they can be seperated from each other by the way they look at technology. Because, technology is accepted as an external theme by neoclassical economics, on the contrary, NIE acceptes technology as an internal fact. One of the most important reasons why technology is internal in terms of NIE can be evaluated by "transaction costs". As a result, the author will give effort to create a critical presentation in order to readdress the viewpoint of mainstream economics about "technology".