How behavior and institutions are affected by social relations is one of the classic questions of social theory. This paper concerns the extent to which economic action is embedded in structures of social relations, in modern industrial society. Although the usual neoclasical accounts provide an "undersocialized" or atomized-actor explanation of such action, reformist economists who attempt to bring social structure back in do so in the "oversocialized" way criticized by Dennis Wrong. Under-and oversocialized accounts are paradoxically similar in their neglect of ongoing structures of social relations, and a sophisticated account of economic action must consider its embeddedness in such structures. The argument in illustrated by a critique of Oliver Williamson's "markets and hierarchies" research program.

Economic Action and Social Structure: The Problem of Embeddedness

This paper considers the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development. Three models are considered and compared to evidence: a model emphasizing physical capital accumulation and technological change, a model emphasizing human capital accumulation through schooling, and a model emphasizing specialized human capital accumulation through learning-by-doing.

The mechanics of economic development

http://individual.utoronto.ca/zheli/sa1.pdf

On the mechanics of economic development

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

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Endogenous Technological Change

Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.

https://memberfiles.freewebs.com/84/90/65819084/documents/TOWARD%20A%20KNOWLEDGE-BASED%20THEORY%20OF%20THE.pdf

Toward a Knowledge-Based Theory of the Firm

A class of differentiated products is completely described by a vector of objectively measured characteristics. Observed product prices and the specific amounts of characteristics associated with each good define a set of implicit or "hedonic" prices. A theory of hedonic prices is formulated as a problem in the economics of spatial equilibrium in which the entire set of implicit prices guides both consumer and producer locational decisions in characteristics space. Buyer and seller choices, as well as the meaning and nature of market equilibrium, are analyzed. Empirical implications for hedonic price regressions and index number construction are pointed out.

https://agecon2.tamu.edu/people/faculty/capps-oral/agec%20635/Readings/Hedonic%20Prices%20and%20Implicit%20Markets%20Product%20Differentiation%20in%20Pure%20Competition.pdf

Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition

This paper analyzes compensation schemes which pay according to an individual's ordinal rank in an organization rather than his output level. When workers are risk neutral, it is shown that wages based upon rank induce the same efficient allocation of resources as an incentive reward scheme based on individual output levels. Under some circumstances, risk-averse workers actually prefer to be paid on the basis of rank. In addition, if workers are heterogeneous inability, low-quality workers attempt to contaminate high-quality firms, resulting in adverse selection. However, if ability is known in advance, a competitive handicapping structure exists which allows all workers to compete efficiently in the same organization.

/pdf/rank-order-tournaments-as-optimum-labor-contracts-518ur1dagj.pdf

Rank-Order Tournaments as Optimum Labor Contracts

Monopoly and product quality

IN RECENT years has not felt his gorge rise upon learning the staggeringly high salary of a shortstop, a movie star, an opera singer? A basketball player on a losing team earns $1.2 million; an author sells the paperback rights to his book for $800,000; a television interviewer switches networks and signs a contract calling for her to receive an annual income of just under $2 million. And the gorge continues to rise. The spectacle of people doing work that doesn't always seem overweighted with significance for annual (and, in the case of rock singers, sometimes nightly) sums of money that figure to exceed what you and I may earn in our lifetimes this, as they say nowadays, does not give off good vibes. What's going on here? What we are talking about, of course, is the phenomenon of superstars, wherein relatively small numbers of people earn enormous amounts of money and seem to dominate the fields in which they are engaged. This phenomenon appears to be increasingly important in the modern world certainly, with the breakdown of economic privacy, it is an increasingly visible phenomenon. The very word superstar implies inflation in our most precious currency, language; to be a star would have been sufficient in my youth. Yet we appear to be stuck with the term. As for the phenomenon itself, viewed from the standpoint of an economist, it may not be as puzzling as it at first glimpse seems. The first thing to be said in this connection is that certain economic activities admit extreme concentration of both personal reward and market size among a handful of participants. Every economic activity supports considerable diversity of talent and significant inequality in the personal distribution of rewards. Activities where superstars are found differ from those in which most of us make our livings by supporting much less diversity and much more inequality in the distribution of earnings. The bulk of earnings goes to relatively small numbers of practitioners typically, the few regarded as among the best in their fields. Similar distributions of earnings in the industrial sector would ultimately come to the attention of the Federal Trade Commission or the

/pdf/the-economics-of-superstars-3h9gizahm6.pdf

The Economics of Superstars

The distributions of firm size, span of control, and managerial incomes are modeled as the joint outcome of market assignments of personnel to hierarchical positions. Assigning persons of superior talent to top positions increases productivity by more than the increments of their abilities because greater talent filters through the entire firm by a recursive chain of command technology. These multiplicative effects support enormous rewards for top level management in large organizations. Also, superior managers control more than proportionately larger firms. Consequently, the distributions of reward and firm size are skewed relative to the distribution of abilities.

Sherwin Rosen

Papers

Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition

Rank-Order Tournaments as Optimum Labor Contracts

Monopoly and product quality

The Economics of Superstars

Authority, Control, and the Distribution of Earnings