Barzel graduated with a B.A. (1953) and M.A. (1956) in economics from Hebrew University of Jerusalem. He completed his Ph.D. in economics from the University of Chicago in 1961. He specializes in price theory and economic organization.
He is interested in property rights, applied price theory, and political economy. (1956) in economics from Hebrew University of Jerusalem. Barzel is known for developing a property rights/transaction cost approach to economics and he has written on topics ranging from car racing to slavery to Jewish lending to voting rules in condominium associations.
Among his many ideas are those about racing to claim assets, multitasking, rationing by waiting, divided ownership of complex assets, measurement costs, and the economic origins of democracy. In the process Barzel's work unearthed the economic rationale for many institutions and offered a framework for analyzing them. Barzel holds an important place among all economists for expanding the scope of economic science in a way that focuses attention on the importance of institutions and the economic logic of their variety.
In the first phase of my research I concentrated on the microeconomics of technical change. My studies of the electric power industry showed that the increase in output per unit of input was largely accounted for by increases in the scale of operations. Questions of innovations
induced by scale, and of ‘premature’ innovative activity in the competition to capture the returns were explored next.
Subsequent work looked at methods of public choice related to public goods. The next stage in my work, greatly influenced by Steven N. S. Cheung, is concerned with the costs of transacting and the specifications of property rights. The central idea is that because of costs such as measuring, metering and policing the terms of exchange, rights to the gains from trade in any transaction are not fully delineated.
Transactors may attempt to capture these gains, using resources in the process. However, both individually, and in their aggregate behaviour, transactors will erect institutions and impose constraints on themselves to reduce the loss from competing the gains away. My main endeavour is to explain the existence of private and government constraints such as the ‘pig in a poke’, tie-in sales, and the prohibition of price discrimination.
The work also attempts to provide a rationale for institutions such as voting in the economic sphere, the existence of consumer-owned production facilities and the prevalence of non-profit organisations. These explanations attempt to be operational: refutable implications are derived from transaction costs considerations. Many are capable of being tested by using readily available, ‘conventional’ data.