Stability, Specialization and Social Recognition
CentER Discussion Paper No. 2006-17
30 Pages Posted: 17 Apr 2006
Date Written: March 2006
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, nonmarket 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 three stages in organizational development: the presence of a stable relational structure; the presence of relational trust and subjective specialization; and, finally, the emergence of objective specialization through the social recognition of subjectively defined economic roles.
Keywords: networks, stability, social division of labor, specialization
JEL Classification: C78, D85
Suggested Citation: Suggested Citation