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Stability, Specialization And Social Recognition

  • ROBERT P. GILLES

    ()

    (Department of Economics, Virginia Polytechnic Institute & State University, Blacksburg, VA 24061, USA)

  • EMILIYA A. LAZAROVA

    ()

    (School of Management and Economics, Queen's University Belfast, 25 University Square, Belfast BT7 1NN, UK)

  • PIETER H. M. RUYS

    ()

    (Center for Economic Research and Department of Econometrics, Tilburg University, Warandelaan 2, P.O. Box 90153, 5000 LE Tilburg, The Netherlands)

Yang's theory of economic specialization under increasing returns to scale (Yang, 2001) is a formal development of the fundamental Smith-Young theorem on the extent of the market and the social division of labor. In this theory, specialization — and thus, the social division of labor — is firmly embedded within a system of perfectly competitive markets. This leaves unresolved whether and how such development processes are possible in economies based on more primitive, non-market organizations.In this paper we introduce a general relational model of economic interaction. Within this non-market environment we discuss the emergence of economic specialization and ultimately of economic trade and a social division of labor. We base our approach on four stages in organizational development: a primordial stage of chaos; the emergence of a stable relational structure; the emergence of relational trust and subjective specialization; and, finally, the emergence of objective specialization through the social recognition of subjectively defined economic roles. In turn, this paves the way for the introduction of market institutions.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Division of Labor & Transaction Costs.

Volume (Year): 02 (2007)
Issue (Month): 02 ()
Pages: 83-109

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Handle: RePEc:wsi:dltcxx:v:02:y:2007:i:02:p:83-109
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