Thom Lambert at Truth on the Market has an excellent summary of the economics of the firm. Here is a very brief excerpt:
The ……

Again, I’m not disagreeing with you that Williamson (and for that matter Klein, Crawford & Alchian) makes the immensely important contribution of giving more meaning to “transactions costs” here by adding asset specificity to the analysis. And the the empirical literature on the relationship between asset specificity and vertical integration IS very consistent — and perhaps strong enough to conclude that asset specificity considerations should be our primary focus in TCE. That Williamson made a very important contribution to further Coase’s analysis, I think, goes without saying. I’m just making the claim here that Coase does more than say “there exist firms … discuss.”

My recollection is that Williamson tries to specify what these costs are, based on various economic characteristics of transactions, e.g. asset specific investments. When I hear references to transaction cost economics I assume people are talking about Williamson’s theories rather than Coase’s more open-ended statement. But aren’t there many plausible explanations as to why “there is a cost of using the price mechanism”? Is there any evidence as to the magnitude of the various economic factors that a Williamsonian transaction cost analysis would suggest, which I assume is what Thom and Vic would have us teach, as compared with a variety of other hypotheses about what the costs of the price mechanism might be?

Finally, one can make an argument that a third basic principle which belongs in the first day of lecture is Capital Structure (M&M; Jensen and Meckling). Of course, this principle overlaps a bit with Agency Cost Theory.