Political Economy II. 2013/14 Winter
(Political Economy II. 2013/14 Winter)

Economic interactions through history were directed by multiple forms of governance. Some are based on formal institutions with obligatory enforcement mechanisms, others are  based  on  voluntary  associational agreements,  and  yet  others  are  based  on contractual  relationships.  These  governance  mechanisms  affect  social  outcomes  of 
economic exchange in several important ways; they determine who gets what from the exchange  and  regulate  property  rights,  they  determine  transaction  costs  from  the exchange and decide how efficient it is, and finally they deal with the collective action problem and the problem of externalities. In the end, all governance mechanisms are put in place by human agency and fulfil their function with different level of efficiency 
and often represent interests of those who created them.