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Evolutionary theory of division of labor: towards a more complete general equilibrium analytical framework of division of labor
In order to distinguish essays and pre-prints from academic theses, we have a separate category. These are often much longer text based documents than a paper.
posted on 09.02.2017by Zhou, Haiou
The justification of the notion of invisible hand entails the modeling of market
coordination mechanisms to spell out how dispersed individuals act and interact in the
market to finalize a resource allocation that is optimal in some sense. Walras (1900) for
the first time provided such a formulation, in which the market coordination was
modeled as an informationally decentralized communication process between a
fictitious auctioneer and economic agents.
This approach to modeling market coordination mechanisms has been widely
applied to economic analyses, becoming the mainstream tradition of constructing
general equilibrium models. For example, neoclassical economists have applied it to the
analysis of resource allocation in environments with given networks of division of labor.
Recently, the new classical economists, represented by Yang and Ng (1993), Sun, Yang
and Yao (2004), Sun, Yang and Zhou (2004), etc., have also applied it to the analysis of
individuals' decisions on labor specialization and the detemination of division of labor
in human societies. The present thesis shows, while the Walrasian tradition is
technically acceptable in the neoclassical models, it is less acceptable in the new
classical model as the model is incomplete in the sense that the stability of the
equilibrium can, analytically, be neither verified nor falsified.
The thesis shows that the cause of this issue, brought up in the new classical model,
is the non-single-valuedness of the aggregate excess demand function. To overcome this
problem, the thesis proposes to abandon the Walrasian tradition and formalize the
market coordination mechanism as an evolutionary game process in which individuals
test and seek their fittest roles in the social network of division of labor through
repeating real actions such as production and trading. These real actions are trials and
errors through which people can obtain necessary information for them to revise their strategies so that the society can eventually reach the optimal state of resource
allocation. It is shown in a simple model that such a dynamic process, when satisfying
certain properties, can coordinate dispersed individuals' decisions with regards to labor
specialization. This ensures an efficient network of division of labor and the required
properties can be easily realized when individuals in the economy revise their strategies
according to some ordinary rules. These analyses result in an evolutionary theory of
division of labor.
The thesis further applies the evolutionary theory of division of labor to a puzzle of
economic history: the bifurcation in growth between China and Western Europe. The
economic growth model proposed in this thesis shows that the separation of scientific
research from material production, which resulted in the appearance of professionalized
scientists in human societies, has significant impact on knowledge creation and
economic growth. As a result, knowledge accumulation and economic growth in a
civilization can be influenced by the dynamic process of the separation of scientific
research from other productive activities. The bifurcation in economic growth between
different civilizations, such as the rise of Europe and the fall-behind of China, can thus
be explained by the differences in exogenous factors, such as the natural and geographic
environments, between civilizations, for different natural and geographic environments
had fostered different evolutionary processes of division of labor.