Property Rights, Asset Specificity, and the Division of Labour Under Alternative Capitalist Relations

Abstract

In this paper we examine the theories of the division of labour and we observe how an "optimal" division of labour must necessarily compromise among the principles of maximising learning by doing (Smith), minimising learning before doing (Babbage and Taylor) and maximising job satisfaction. However, property rights influence the characteristics of ireal lifei divisions of labour. Because of asset-specificity, property rights and the organisation of labour influence each other in self-reinforcing manner. Owners of specific skills tend to acquire control while, at the same time, owners of factors who control the firm tend to become firm-specific. The self-sustaining nature of the relation between rights and organisations of work can explain the diversity of capitalist models. We distinguish among "classical capitalism", "workers' company capitalism" and "unionised capitalism" and consider the relative merits of the division of labour that tends to be introduced under each one of these property right systems.

JEL Classification: D21, D23, K11, P16