A Transaction Cost Approach to Families and Households (Book Review).

The transaction cost approach provides a new perspective on families and house-holds. Unlike the new home economies, which focuses exclusively on household production, it recognizes the importance of household organization and family structure. The transaction cost approach views marriage as a "governance structure,'' emphasizes the role of "bargaining" within families, and draws attention to the advantages and disadvantages of family organization in terms of incentives and monitoring, and to the special roles of "altruism" and "family loyalty." It also recognizes the disadvantages of family governance: conflict spillover, the toleration of inefficient personnel, inappropriate ability match, and inability to realize economies of scale. If activities are assigned to institutions in an efficient or cost-minimizing fashion, the balance of these advantages and disadvantages plays a major role in determining which activities are carried out within families and which are performed by firms, nonprofit institutions, or the state. [ABSTRACT FROM AUTHOR]