Credible Commitments: Reciprocity

1. General Reciprocity transforms a unilateral supply relation where A sells X to B into a bilateral one, whereby A agrees to buy Y from B as a condition for making the sale of X and both parties understand that the transaction will be continued only if reciprocity is observed. The resulting contractual relation

Credible Commitments: The Hostage Model Extended

Assume that the two firms are engaged in tied bilateral trade and that both have made specific asset investments of k in support of each other. Assume further that each firm incurs redeployable costs of production of v2 and that pˆ is the price at which product is traded. In deciding whether to take

Credible Commitments: Petroleum Exchanges

“The task of linking concepts with observations demands a great deal of detailed knowledge of the realities of economic life” (Koopmans, 1957, p. 145). The phenomenon of petroleum exchanges has puzzled economists for a very long time. It routinely comes up in antitrust cases and investigations. The 1973 case brought by the United States

Credible Commitments: Concluding Remarks

These two chapters on credible commitments maintain and develop the viewpoint that private ordering is widely used to govern complex contractual relations. It thus takes issue with the legal centralism tradition. Rather than employ a legal rules approach to contract, the concept of contract as framework is emphasized instead. Disputes are not therefore routinely

The Organization of Work: The Radical Account of Hierarchy

The Radical account of hierarchy comes down to this: (1) All legitimate efficiency purposes of organization can be discerned by reference to the neoclassical theory of the firm; (2) neoclassical theory makes no provision for hierarchy; accordingly (3) the alternative hypothesis—namely, that hierarchy operates in the service of power—wins. Original contributions by Stephen Marglin

The Organization of Work: Transaction Cost Aspects

Recall that two branches of transaction cost economics are distinguished in the cognitive map of contract set out in Chapter 2: a governance branch, where the concern is with adaptive, sequential decision-making, and a measurement branch, where the problems are attributable to information impact- edness. To be sure, the two conditions are commonly joined

The Organization of Work: A Comparative Institutional Framework

1. Assumptions  Marglin contends that the nonexperimental naturelof the social sciences con- tributes to the continuing neglect of internal organization. Were that not the case, alternative inodes of organization, including egalitarian work modes, would be designed and tested experimentally (Marglin, 1974, pp. 33-34). While I agree that experimental testing of that kind has great

The Organization of Work: A Comparative Institutional Assessment

The issue to be addressed here is: Socioeconomic attributes of tb“ enterprise aside, do alternative work modes differ systematically in efficiency respects? A set of simple efficiency criteria is proposed first. Crude rankings of work modes with respect to those criteria are then attempted. 1. Simple Efficiency Criteria  None of the eleven efficiency measures

The Organization of Work: Power Versus Efficiency

The argument that successive modes of organization represent efficiency ad- vances on earlier modes proses for the radical economics literature a dilemma that was apparent even in Karl Marx. I review some of the consequent tensions here. 1. Origins of the Division of Labor Early in his chapter on the division of labor and manufacture,

The Organization of Work: Concluding Remarks

Victor Goldberg observes that “conflict and struggle are . . . fundamental elements of the radical’s world view, and it is, therefore, quite natural for issues of power to surface in their analyses.” He further holds that the “lesson the nonradicals should draw from the radical account is to take issues of power seriously”

The Organization of Labor: Central Issues

A central thesis of this book is that a common theory of contract applies to transactions of all types—labor market transactions included. The organization of labor is nevertheless a very complicated matter. No single approach to the study of labor organization is at present adequate—which is to say that the study of these matters

The Organization of Labor: An Abstract Approach

Although it is sometimes argued that there is a single preferred way by which to organize labor, casual inspection discloses that labor organization is highly varied. An explanation for the differences would plainly add to our under- standing. The transaction cost approach rests on the proposition that governance Structures for labor must be matched

The Organization of Labor: Union Organization

Unions are complex organizations, have many facets, and serve many purposes. Efficiency aspects are mainly emphasized here. They are examined from the standpoint of private ordering. Other aspects, however, are also considered, including a discussion of power. 1. Private Ordering  Katherine Stone has recently examined the development of American labor law in the period

The Organization of Labor: Problematic Features of Union Organization

The foregoing emphasizes the beneftts of eollective organization. They are especially great in circumstances where the labor force acquires (or the man- agement wishes to induce the workers to acquire) firm-specific human capital. But there are additional efficiency benefits, of a simple agency kind, that collective organization can provide in virtually all enterprises. Unions

The Organization of Labor: The Producer Cooperative Dilemma

This book is mainly preoccupied with assessing capitalist modes of organiza- tion. Although the underlying approach to the study of organization applies to noncapitalist modes as well, few such application are attempted. The following brief discussion of producer cooperatives is mo remedy. It merely poses issues for which further study is needed. The basic

The Organization of Labor: Dignity

Assume, arguendo, that the political reforms favored by radical economists and others will not be implemented immediately. Are there other measures that can and should be taken to mitigate the oppressiveness of the Authority Relation in the meantime? My examination of that question is in two parts. The literature on job satisfaction and alienation

The Organization of Labor: Concluding Remarks

Recall the contracting schema in section 4 of Chapter 1, where nodes A, B, and C are distinguished. The main implications of the transaction cost ap-proach to labor organization, as developed in this chapter, may be summarized with reference to that schema as follows: Labor market transactions located at node A are ones for

The Modem Corporation: Railroad Organization

The 1840s mark the beginning of a great wave of organizational change that has evolved into the modem corporation (Chandler, 1977). According to Stuart Bruchey, the fifteenth-century merchant of Venice would have understood the form of organization and methods of managing men, records, and investment used by Baltimore merchants in 1790 (1956, pp. 370-71).

The Modem Corporation: The M-Form Innovation

1. The Transformation  The most significant organizational innovation of the twentieth century was the development in the 1920s of the multidivisional structure. That development was little noted and not widely appreciated, however, as late as 1960. Leading management texts extolled the virtues of “basic departmentation” and “line and staff authority relationships,” but the special

The Modem Corporation Applications: Conglomerate and Multinational Enterprise

As discussed in earlier chapters, the inhospitality tradition regarded nonstandard contracting practices as presumptively unlawful. Nonstandard internal forms of organization have also been regarded with deep suspicion. The same technological orientation to economic organization plainly informed both of those approaches. Unless a clear-cut technological justification for the con- tracting practices or organizational structure in