Organizational Equilibria and Production Efficiency

Abstract

New Institutional Theory has pointed out mechanisms by which technology can influence property rights and organizational forms. We argue that the argument can be integrated and enriched by using also the opposite argument: property rights and technology can also influence technology. We develop an "organizational equilibria" framework and we show that when New Institutional Theory is integrated in this direction, a multiplicity of "organizational equilibria" can arise and production efficiency may no longer be achieved. The paper introduces the argument by pointing out some similarities between Marx's theory of history and modern transaction cost theories, which imply a common departure form the standard methodology of traditional neoclassical theory.

Keywords: New Institutional Theory, Radical Economists, Marxian Theory, Multiple Equilibria

JEL Classification: L2, M2, P1, P5