Edited by Samuel Bowles, Herbert Gintis and Bo Gustafsson. Cambridge: Cambridge University Press, 1993. Pp. xviii, 340. $54.95.
Do not let the price of this book deter you from adding it to your university's library. This is a large volume, with three editors, 23 authors, 18 separate essays, and a preface. This ambitious undertaking was financially supported by the Tercenary Fund of the National Bank of Sweden through its funding of the Swedish Collegium for Advanced Study in Social Sciences. One of the editors, Bo Gustafsson, was the director of the Collegium. He contributed a preface that explains the basic thrust of the collection:
Ideally we are in search of an economic system, which combines
the flexibility and vitality of modem capitalism with
full employment, extensive participation in decision-making,
a more egalitarian distribution of income and wealth in
firms, and promotion of values oriented toward cooperation
and solidarity between people [p. xvii].
The search for such an economic system leads the contributors of this volume to consider the labor-owned and labor-managed firm as an alternative to the investor-owned and hierarchically managed corporation. The essays ask the right questions, but they use a game-theoretic approach to critique the usual neoclassical economics and its support of the status quo. As pointed out by Samuel Bowles and Herbert Gintis, the other two editors of the collection, the game-theoretic approach allows the critic to perform "an inside job" on the conservative practitioners of the dismal science, making it hard for them to ignore the critique.
A powerful critique it is, but it is still largely hypothetical. In particular, the contributors use many of the analytical techniques of game theory and many of the conceptual abstractions of transaction cost economics to investigate the hypothetical characteristics of economic models in which the preferences of economic agents and the enforcement of claims between agents are both endogenously determined. The game played is that of pursuing self-interest with no holds barred--no exogenous constraints on shirking, stealing, lying, or cheating. The endogeneity of preferences and enforcement makes for a healthy dose of realism, but the game-theoretic approach makes for some very heavy going, indeed.
In spite of the analytical gymnastics, several important issues are raised in these essays, and results are often obtained that are the exact opposites of the usual...