Capitalism is known for very high transaction costs and it becomes worse each year.

What kind of costs are included in this?

1. Costs of finding proper information. Before arranging any deal buyers and sellers need to find each other, they need to know common terms, prices and preferable some insider information. Costs consist from time and resources required to obtain all such information, as well as cost related to losses due to information being incomplete of wrong.

2. Costs of measurements. Each of the goods or services involved have lot of useful qualities and properties. You have two kinds of properties - physical ones and legal ones. You need to measure or estimate all qualities, this involves testing procedures costs, experts costs, sometimes also formal certification and formal independent testing costs.

3. Costs of performing negotiations and making contract. Capitalism demand significant resources being spent on this parts. The more complex is the deal and the more sides involved the higher the costs. Also in this costs are included losses due to errors in contracts or not enough protection included in contracts.

4. Costs due to issues with specifications, protection of property rights and protection of intellectual rights. It is very complex issues in capitalism and sometimes costs of intellectual rights can be extremely high. Also if you have lot of owners and very restricted resource you have high costs of negotiating and renegotiating their property rights.

5. Costs due to opportunistic behavior. This means such behavior that goes against deal terms, usually one side want to obtain some advantage that is against other side wish. This is very common issue in capitalism.

The more labor division you have and the more globalized production and trade become - the higher the transaction costs and the less effective capitalist system becomes. Pinnacle of this is any information product.

Independent valuations provide number as high as 50% of US GDP for transaction costs.