Sane man !

Sunday, July 31, 2005

Is there any kind of study or theory...

...on the moral hazards of the division of labour ?

It must be one of the fundamental limitations of the modern economic organisation, along with the limits of hierarchies. Although the specialisation bring some increased efficiency (in theory), there will be some "leaks" because of the moral hazards. There are no reasons why this way of organising our economies would be perfect, after all it has only quite recently been pushed to such an extreme.

Ex: people in the finance industry are in charge of dealing with money, specialised in that area, and dedicated to the task... but they will have more occasions to steal or appropriate some, more abilities to do it. Just as the potato peeler will have more occasions to nick some 'tatties! All moral hazards are not equal.
Similarly, managers are necessary, but the pays of the people setting the payrolls will of course be inflated...

This is related to Arrow and Stiglitz's asymmetries of information, similar I suppose... Of course the question would be: is the system still overall more efficient than if less specialisation is used?

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