Asia & the Pacific Policy Studies

Linking “adaptive efficiency” with the basic market functions: A new analytical perspective for institution and policy analysis

By Ligang Song and Chérie Simpson

23rd May, 2018 - Economics and finance | The World

This conceptual paper develops a new perspective linking the concept of “adaptive efficiency” with the allocative, discovery and creative functions of the market from an institutional perspective. The efficacy of the adaptive efficiency of market functions in improving economic performance is proposed to be measured by changes in transaction costs. This perspective enables an analysis of the independent and interrelated effects of these functions, provides a more complete understanding of entrepreneurial activities and the efficient allocation of resources, better deals with the central problems of economic system and organisation, namely, adaptation and the coordination of knowledge, and has useful implications for public policy.

Image: Thomas Hawk on flickr

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