Specialization and Economic Organization : A New Classical Microeconomic Framework

by Yang, Xiaokai; Ng, Yew-Kwang

• ISBN13: 9780444886989
• ISBN10: 0444886982
• Format: Hardcover
• Copyright: 1993-02-01
• Publisher: Elsevier Science Ltd

Summary

As the subtitle indicates, this book presents a new classical microeconomic framework. It develops a new unifying analytical framework that covers topics concerning international trade, development economics, growth theory, transaction costs economics, comparative economics, management economics, urban economics, industrial organization, and macroeconomics. The new classical microeconomic framework is used to bring the analysis of economies of specialization, the division of labor, and the structure of economic organization into the central place of economics.

Table of Contents

Preface	vii
Contents	xi
Introduction	1	(1)
Intrinsic Relationship Between the Evolution of the Division of Labor and Other Economic Phenomena	1	(2)
The Implications of the Dichotomy Between Pure Consumers and Pure Producers for Economic Analysis	3	(1)
Why Economists Shifted Their Attention From the Economic Organization Problem to the Resource Allocation Problem	4	(8)
Diversifying the Frameworks of Economic Analysis	12	(6)
Part I: Economies and Diseconomies of Specialization
Analytical Frameworks of Economics	18	(21)
What is a Framework of Economic Analysis	18	(3)
Assessment of Quality of a Framework	21	(8)
The Framework in This Book	29	(10)
Economies of Specialization and Transaction Costs	39	(32)
A System of Production for a Consumer-producer	39	(11)
Preferences for Diverse Consumption and Transaction Costs	50	(2)
Individual Decision Problems	52	(7)
Equilibrium and Its Comparative Statics	59	(8)
Welfare Implications of Equilibrium	67	(2)
The Distinctive Features of Equilibrium in our Framework	69	(2)
The Pricing Mechanism and ex post Transaction Costs	71	(23)
A Bilateral Bargaining Model	71	(9)
The Endogenization of the Choice of the First Mover	80	(6)
Why the Market Emerges from the Division of Labor	86	(4)
The Bargaining Equilibrium with Unemployment	90	(2)
The Endogenization of the Principal-agent Relationship	92	(2)
Economies and Diseconomies of Information Asymmetry	94	(23)
Specialization and Economies of Information Asymmetry	94	(2)
Economies of Information Asymmetry	96	(3)
Dual Functions of the Price System: Coordinating the Division of Labor and Promoting Information Asymmetry	99	(16)
The Function of the Market in Exploiting Economies of Information Asymmetry	115	(2)
Part II: Rethinking Trade Theory and Development Economics
Why and How International Trade Emerges from Domestic Trade	117	(30)
Rethinking Trade Theory	117	(1)
Conflict Between Preferences for Diverse Consumption and Economies of Specialization	118	(2)
The Equilibrium Level of Division of Labor	120	(7)
Comparative Statics	127	(7)
Evolution of the Division of Labor Generated by Exogenous Evolution of Transaction Efficiency	134	(2)
Organizational Efficiency and the Function of the Market in Discovering the Efficient Pattern of Organization	136	(2)
Emergence of International Trade from Domestic Trade	138	(4)
Why do we need the market?	142	(2)
Unequal Income Distribution and Dual Economy	144	(3)
Proof of Lemma 2.1 for the Model in This Chapter	145	(2)
Emergence of Professional Middlemen and Urbanization	147	(29)
A Model with Trading Activities and Heterogeneous Parameters	147	(2)
Decisions on Being a Professional Middleman	149	(2)
Market Structures and Corner Equilibria	151	(5)
The Pareto Optimal Pattern of Trade and Economic Organization	156	(5)
How Does the Market Sort out the Efficient Pattern of Economic Organization?	161	(4)
Equilibrium Trade Pattern, Level of Division of Labor, and Urbanization	165	(3)
Emergence of Professional Middlemen and a Hierarchical Structure of Economic Organization and a Dual Structure Between the Urban and Rural Sectors	168	(8)
Proof of Lemma 6.2	172	(1)
Proof of Proposition 6.7	173	(3)
Endogenous Evolution of the Division of Labor	176	(26)
Evolution of the Division of Labor, the Accumulation of Human Capital, and Development of Endogenous Comparative Advantages	176	(2)
A Dynamic Model with Learning by Doing	178	(3)
Optimum Speed of Learning by Doing and Evolution of Endogenous Comparative Advantage	181	(13)
The Evolution of the Extent of the Market, Trade Dependence, Endogenous Comparative Advantages, and Economic Structure	194	(2)
Rethinking Development Economics and Growth Theory	196	(6)
Proof of Lemma 2.1 for the Dynamic Model	201	(1)
Concurrent Increases in Specialization and Consumption Variety	202	(12)
Why the Variety of Available Goods and Specialization Increase Concurrently	202	(2)
Tradeoffs among Economies of Specialization, Economies of Complementarity, and Transaction Costs	204	(2)
The Function of the Market in Determining the Efficient Variety of Available Consumer Goods	206	(2)
Implications of the Endogenization of Aggregate Demand	208	(6)
Part III: Rethinking Theory of the Firm and Economics of Property Rights
Why and How Firms Emerge from the Division of Labor	214	(20)
Why is the Institution of the Firm Needed?	214	(1)
Economies of Specialization in Roundabout Production	215	(1)
The Efficient Pattern of Economic Organization	216	(2)
The Institution of the Firm and the Structure of Residual Rights	218	(5)
Economies of Specialization, Economies of Division of Labor, and Economies of the Firm	223	(5)
Does the Structure of Residual Rights Make a Difference?	228	(6)
Function of the Market in Searching for Efficient Contractual Arrangements	234	(23)
Formalizing the Economics of Property Rights	234	(2)
A Tradeoff Between Economies of Specialization and Coordination Reliability	236	(11)
Concurrent Increases in Productivity, the Level of Division of Labor, and a Risk of Coordination Failure	247	(5)
The Invisible Hand and ``Market Failure''	252	(5)
The Extent of the Market and Rights Specified in a Contract vs. Rights to Contracting	257	(20)
Two Functions of the Market: Executing Exchanges and Keeping Pressure on the Incumbent Trader Partners	257	(2)
A Tradeoff Between Economies of Specialization and Coordination Reliability	259	(5)
Efficient Vagueness of Property Rights and Market Size	264	(10)
Possible Extensions and Applications	274	(3)
Part IV: Specialization and Hierarchical Structures of the Division of Labor
Emergence of New Producer Goods and Related New Technology	277	(16)
A Tradeoff Between Economies of Specialization and Economies of Complementarity	278	(1)
The Efficient Number of Producer Goods and Level of Specialization	279	(6)
Concurrent Changes in the Level of Division of Labor, Productivity, and Input Diversity	285	(3)
Changes in Economic Structure	288	(5)
Proof of Lemma 12.1	291	(2)
Economies of Roundaboutness and Industrialization	293	(24)
The Division of Labor and Roundabout Production	293	(2)
A Model with a Variable Hierarchical Structure of Goods	295	(3)
Corner Equilibria in Ten Market Structures	298	(7)
Concurrent Evolution of Specialization and Roundaboutness	305	(4)
Concurrent Evolution of Specialization, Roundaboutness, and Firms and Disappearance of Traditional Goods	309	(8)
The Structure with Goods z, y, v, x, and w	315	(1)
The Structures without Good y	315	(2)
Efficient Hierarchy and the Division of Labor	317	(23)
Why Can a Hierarchy Improve Efficiency?	317	(2)
A Centralized Hierarchy and the Division of Labor	319	(4)
A Decentralized Hierarchy and the Division of Labor	323	(13)
Evolution of the Hierarchical Structure of the Market	336	(4)
Part V: Complicated Dynamic Mechanisms Generating Endogenous Evolution of the Division of Labor
Entrepreneurship, Investment, and Experiments with Economic Organizations	340	(26)
The Efficient Pattern of the Division of Labor in a Walrasian Regime	341	(1)
Costs in Acquiring Information about the Efficient Pattern of the Division of Labor	342	(4)
Information Costs and Endogenous Evolution of the Division of Labor	346	(10)
Information Asymmetry, Entrepreneurship, and Investment	356	(5)
Investment and the Function of the Price System in Coordinating Experiments with Patterns of the Division of Labor	361	(5)
Solution of the Dynamic Programming Problem	363	(3)
Concurrently Endogenous Evolution of Specialization, Firms, and Product Diversity	366	(25)
A Dynamic Equilibrium Model with Learning by Doing and an Endogenous Number of Producer Goods	367	(3)
Dynamic Equilibrium Level of Specialization and Input Variety	370	(10)
Concurrent Evolution of Specialization, Variety of Producer Goods, and the Institution of the Firm	380	(11)
Proof of Lemma 16.1	385	(1)
Proof of Proposition 16.1	386	(3)
Proof of Proposition 16.2	389	(2)
Part VI: Empirical Evidence and Rethinking Macroeconomics
Why and How Money Emerges from the Division of Labor	391	(20)
Why Is Money Needed?	391	(3)
A Model Endogenizing the Monetary Regime	394	(2)
Efficient Level of Division of Labor and Monetary Regime	396	(9)
Implications of the Institution of the Firm for Monetary Regime	405	(6)
Proof of Lemma 17.1	408	(3)
The Division of Labor, Business Cycles, and Unemployment	411	(23)
Market Failure or Market Miracle?	411	(3)
The Relationship Between the Business Cycle and the Division of Labor	414	(2)
Cyclical vs. non-cyclical Corner Equilibria	416	(12)
General Price Level, Business Cycles, and Unemployment Rate	428	(4)
Emergence of Firms and Fiat Money from the Division of Labor	432	(2)
Testing the Theories in this Volume against Empirical Observations	434	(37)
Difficulties in Testing the Theories in this Volume	434	(4)
The Model and Underlying Theory	438	(3)
Measuring the Level of Division of Labor	441	(2)
Quantifying Efficiency in Specifying and Enforcing Property Rights	443	(24)
The Main Results	467	(1)
More Empirical Studies	468	(3)
Epilogue	471	(11)
References	482	(11)
Index	493