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Allocation of Economic Competence in Teams: A Comparative Institutional Analysis

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  • Pelikan, Pavel

    (The Research Institute of Industrial Economics)

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    Abstract

    Attention is called to a little explored scarce resource, termed 'economic competence', which combines features of human capital and bounded rationality, and causes a singularity in resource-allocation in society. The performance of each economy is shown to strongly depend on how this resource is allocated, which in turn strongly depends upon the economy's institutions ('rules of the game'). Two stylized institutional variants of market selection and one of government selection are compared for their short-term and long-term effects upon the output and growth of a perfect team economy. The results are exemplified by throwing new light on the social value of financial markets and the limitations of industrial policies.

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    Bibliographic Info

    Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 480.

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    Length: 53 pages
    Date of creation: 15 Aug 1997
    Date of revision:
    Handle: RePEc:hhs:iuiwop:0480

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    Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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    Keywords: Economic competence; Human capital; Bounded rationality; Institutions; Entrepreneurs; Investors; Government; Market selection; Financial Markets; Industrial policies;

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    References

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    1. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351.
    2. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June.
    3. Roemer, John E., 1987. "Egalitarianism, Responsibility, and Information," Economics and Philosophy, Cambridge University Press, vol. 3(02), pages 215-244, October.
    4. Winter, Sidney G, 1971. "Satisficing, Selection, and the Innovating Remnant," The Quarterly Journal of Economics, MIT Press, vol. 85(2), pages 237-61, May.
    5. Pechman, Joseph A, 1990. "The Future of the Income Tax," American Economic Review, American Economic Association, vol. 80(1), pages 1-20, March.
    6. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110.
    7. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implicationsfor Growth," University of Chicago - George G. Stigler Center for Study of Economy and State 65, Chicago - Center for Study of Economy and State.
    8. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
    9. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Pelikan, P, 1992. "The Dynamics of Economic Systems, or How to Transform a Failed Socialist Economy," Journal of Evolutionary Economics, Springer, vol. 2(1), pages 39-63, March.
    11. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
    12. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-95, September.
    13. Pelikan, Pavel, 1989. "Evolution, economic competence, and the market for corporate control," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 279-303, December.
    14. Sah, Raaj K & Stiglitz, Joseph E, 1991. "The Quality of Managers in Centralized versus Decentralized Organizations," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 289-95, February.
    15. Pelikan, Pavel, 1989. "Evolution, Economic Competence, and the Market for Corporate Control," Working Paper Series 215, Research Institute of Industrial Economics.
    16. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211.
    17. Pranab Bardhan and John E. Roemer., 1991. "Market Socialism: A Case for Rejuvenation," Economics Working Papers 91-175, University of California at Berkeley.
    18. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-36, December.
    19. Pavel Pelikan, 1993. "Ownership of firms and efficiency: The competence argument," Constitutional Political Economy, Springer, vol. 4(3), pages 349-392, September.
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    Cited by:
    1. Pelikan, Pavel, 2004. "Interconnecting Ecolutionary, Institutional and Cognitive Economics: Six Steps towards Understanding the Six Links," Ratio Working Papers 48, The Ratio Institute.
    2. Pelikan, Pavel, 2006. "Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy," Ratio Working Papers 85, The Ratio Institute, revised 03 Sep 2006.
    3. Martin, Pardupa, 2007. "Cooperation or rivalry? Employee’s effort and appropriate knowledge distribution as key elements for maximizing the profit of the firm," MPRA Paper 26428, University Library of Munich, Germany.
    4. Pelikan, Pavel, 2008. "The government economic agenda in a society of unequally rational individuals," MPRA Paper 19127, University Library of Munich, Germany, revised 06 Dec 2009.
    5. Pelikan, Pavel, 1999. "Institutions for the Selection of Entrepreneurs: Implications for Economic Growth and Financial Crises," Working Paper Series 510, Research Institute of Industrial Economics, revised 15 Feb 2000.
    6. Gerhard Wegner, 1998. "Environmental (De-) Regulation, Competition, and Policy Rules," Constitutional Political Economy, Springer, vol. 9(3), pages 213-234, September.

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