Some General Considerations on Coordination Mechanisms and their Potential Role in Rural Policy

Abstract

The objective of this paper is to discuss, from the theoretical point of view (transaction costs economics and system approach), the limitations of the governmental policy and rural policy in particular – which aims to intervene into coordination of transactions between economic agents. The conceptual framework of the paper is based on the distinction between three ideal types of coordination’s mechanisms (namely: competition, hierarchical control, values/norms and vertical liaisons) and real institutional arrangements, which could base only on one of ideal type or be a mixture of them. Rural policy is dedicated to solving the problem, which could not be solved solely by a market. However, governmental intervention suffer from failures of its own. This is a true particularly in the case of uniformly applied, extended top-down policy based mainly on hierarchical control. In such a case, market failures could be mitigated (and therefore market transaction costs), but, on the other hand, the political transaction cost (variable and fixed as well as) could be tremendous. The main conclusion of the paper is that one could expect that the minimum of both categories of transaction costs (market and political) will be probably achieved in the case of rural policy, which is composite of different coordination’s mechanism, not solely hierarchical control. This conclusion is in line with the shift to the new paradigm (Rural Policy 3.0) recommended by OECD, which generally is based on stronger decentralization, improved multi-level governance and involvement of non-government as well as private organizations.