A good is a bundle of attributes. For instance, an apple can be desired for its freshness, taste, or its color. Before we can price a product, we need to measure those valuable attributes. And measurement is costly. Therefore, we price those valuable attributes indirectly by say measuring the weight of an apple instead of the three valuable attributes mentioned above. Another example is labor. We value the output of labor, and sometimes we can price it directly using schemes such as piece rate. Sometimes we don’t as it may be too expensive to do so. So we try to find a proxy and use it as a guide in pricing. Time is one such proxy as we don’t value the time devoted by a worker in a particular job per se, but the output he makes.
In the first volume of “Economic Explanation”, Professor Cheung has some discussion on this issue. There is also a bit of discussion in his “Contractual Nature of the Firm” which is now reprinted in his collected works. Some other good reference sources include Yoram Barzel‘s (Professor’s former colleague at UW) “Economic Analysis of Property Rights” (2nd edition Cambridge 1997) and Yoram’s 1982 piece entitled “Measurement Costs and Organization of Markets” in Journal of Law and Economics.
For a discussion of Professor Cheung and Barzel’s place in the development of new institutional economics, there is a paper called “Yoram Barzel and the New Institutional Economics” downloadable via SSRN. The author, Dean Lueck (a student of Barzel’s), examines professor Barzel’s thoughts through the history of economics lense, a paper worth pondering.