Some theory of labour management and participation

Abstract

ONE HUNDRED YEARS AGO, the first edition of the Elements d 'Economie Politique Pure by Leon Walras was half-way through printing. This anniversary provides special justification for the presentation of a Walras lecture at our congress. It also places a special burden on the author of the lecture to rationalize the choice of his pet subject through appropriate references to the life and works of Walras. I will in due course provide such rationalization for my topic, which is the pure theory of labor management and participatory economies. This topic currently arouses a great deal of interest, at various levels. For some, labor management, or self-management, is a global project of political, social, and economic organization. For others, it is a form of organization that meets a basic human aspiration and should be fostered wherever possible, through modest as well as ambitious projects. For our purpose here, a labor-managed economy is an economy where production is carried out in firms organized by workers who get together and form collectives or partnerships. These firms hire nonlabor inputs, including capital, and sell outputs, under the assumed objective of maximizing the welfare of the members, for which a simple proxy is sometimes found in the return (value added) per worker. capital can be either publicly or privately owned. To permit easier comparison, I will base this presentation on private ownership. Such economies have been studied by Vanek whose General Theory of LabourManaged Market Economies [24] extends comprehensively the seminal contributions of Ward [28] and Domar [5]; and by Meade who presents a lucid, concise review of that work, as well as his own views on The Theory of LabourManaged Firms and Profit Sharing [16]. I would like to report here on my attempts at studying labor-managed economies with the general equilibrium methodology. outcome of these attempts may serve as a yardstick to assess the usefulness of the approach introduced by Walras one hundred years ago. Although my presentation will be largely informal, it rests upon technical analysis that will be made available separately. presentation will consist of three parts. In the first part, I define a Walrasian equilibrium for a labor-managed market economy and contrast its properties with those of a competitive equilibrium. Next, I discuss the choice of working conditions under labor management and profit maximization. Finally, I take up some of the more intriguing problems raised by risk-bearing.