Free markets are not free. They impose costs for gathering information, assigning contextual value, comparing choices and measuring market outcomes. "Transaction costs" are the time and effort required to initiate and execute a marketplace transaction.
Schramm's communication model ( based on Claude Shannons' theory of communication ) exposes the mechanism of transaction costs.
Jack creates a message, encodes it using contextual information, transmits it to Jill. Jill receives and decodes the message, also using contextual information.
For human beings, the transmission, reception and assimilation of information requires a fixed, finite amount of time and effort. Just like computer hardware or telephone wires, human beings themselves have a fixed rate at which information can be transferred.
