[PEN-L:1861] Worker managed firms and n-c theory (RE: Soc.dem and Utopia)

[Anders Ekeland <anders.ekeland@xxxxxxxxx>]

I am always a bit surprised that progressive economist are so willing to
discuss the Yougoslav experience and  worker managed firms in general on
the basis of on the traditional neo-classical assumptions about the firm.
Drawing conclusions that they would employ less labour, lay-off less labour
etc. etc.

But the n-c "theory of the firm" is utterly divorced from reality. In
reality there are not smooth production functions, there are Knightian
uncertainties, there are shareholders, CEOs, managers, technicians, workers
- all with their specific knowledgebases and interests. For most firms it
is survival/expansion and not marginal adjustment of employment that is the
interesting question.

Concerning employment: judging from my anecdotal experience, very many
worker owned/managed would not exist at all if they were not - worker
managed. The alternative (unique stable equilibrium??) is no employment. No
production at all of that specific product. The n-c framework is IMHO not
suited to say anything interesting about worker managed firms.

The real interesting problems with worker managed firms has very little to
do with their employment effect. Much more interesting is the internal
division of labour/power among the workers, their innovation
strategies/processes etc. For the Yugoslav experience, Cahterine Samarys
book "Le marche contre l'autogestion" is an example of a discussion of real
problems. (La Breche and PUBLISUD, 1988)

Since n-c is a pure deductive theory, they are not interested in empirical
facts, ignoring the evidence contrary to their theory. They always reason
as if we were in equilibrium and not developing a backward country, not
trying to modify regional differences etc. etc. We are always out of the
totally imaginary n-c equilibrium so none of their conclusions actually
apply even on their own terms! Why should we accept them?

The n-c theory of the firm is a theory that cannot function as an guide for
real policy recomendations.
Let me take an example from a field I know better, research policy. The
traditional n-c model talks about additionality, marked failure, social and
privat returns etc. ad nauseam. But the fact is that very many firms do not
do any such calculations, have no concrete idea of an (risc adjusted)
expected rate of return on research projects (BTW: even fewer calculate the
rates of return post fact - as everybody who have tried know: it is very,
very difficult!).

So how are public research councils to pick those projects that the private
firms do not find profitable enough, but wich have great social returns
when the firms themselves do not calculate or know?

And those firms that do calculate rates of return are often wildly
optimistic, often badly mistaken on wich projects are the real winners
(Microsoft Net vs. Internett). How do such facts fit into a n-c modell? How
do you handle them if you are into the business of distributing research
funds and not in the easy biznizz of writing articles full of tautological
n-c deductions?

If one wants to know how real firms operate, read Dilbert, the first
chapters of Nelson&Winter, Penrose, use your own experience, read the
bizniz press.

Of course we - the progressive economists need to come forward with a
detailed, empirically substantiated critique of the hegemonic n-c model. We
need to develop alternative theories, but an important firste step is to
not accept it as the natural starting point for discussions about
workermanaged firms, public research policy etc. etc. Let the n-c people
prove the empirical fundament of their elegant theory!


Merry Christmas

Anders Ekeland