Cognitive Comparative Advantage and the Organization of Work: Lessons from Herbert Simon's Vision of the Future

In a marvelous but somewhat neglected paper, 'The Corporation: Will It Be Managed by Machines?' Herbert Simon articulated from the perspective of 1960 his vision of what we now call the New Economy the machine-aided system of production and management of the late twentieth century. Simon's analysis sprang from what I term the principle of cognitive comparative advantage: one has to understand the quite different cognitive structures of humans and machines (including computers) in order to explain and predict the tasks to which each will be most suited. Perhaps unlike Simon's better-known predictions about progress in artificial intelligence research, the predictions of this 1960 article hold up remarkably well and continue to offer important insights. In what follows I attempt to tell a coherent story about the evolution of machines and the division of labor between humans and machines. Although inspired by Simon's 1960 paper, I weave many other strands into the tapestry, from classical discussions of the division of labor to present-day evolutionary psychology. The basic conclusion is that, with growth in the extent of the market, we should see humans 'crowded into' tasks that call for the kinds of cognition for which humans have been equipped by biological evolution. These human cognitive abilities range from the exercise of judgment in situations of ambiguity and surprise to more mundane abilities in spatio-temporal perception and locomotion. Conversely, we should see machines 'crowded into' tasks with a well-defined structure. This conclusion is not based (merely) on a claim that machines, including computers, are specialized idiots-savants today because of the limits (whether temporary or permanent) of artificial intelligence; rather, it rests on a claim that, for what are broadly 'economic' reasons, it will continue to make economic sense to create machines that are idiots-savants.

Church and State

Church and state have historically had an uneasy relationship, sometimes close allies, at others harsh adversaries, and at still others largely independent of one another. This paper develops an economic model of this relationship, where the state's objective is to maximize net tax revenue, while the church provides religious goods. Religious goods benefit the state in two ways: first, they provide utility to citizens, thus allowing the state to extract more taxes before running up against citizens' reservation utility (the point at which they would revolt), and second, they potentially provide legitimacy to the state, thereby lowering the costs of tax collection. If the latter effect is strong enough, the state may find it optimal to take control of the church, either to enhance its legitimizing effect, or to suppress its de-legitimizing effect. To evaluate the model's implications, we use recent cross-country data on the relationship between religion and state, including measures coded from the 2001, 2003, and 2005 International Religious Freedom reports. We also examine in more detail some of the paradigmatic cases indicated by the model, presenting various types of evidence from current and historical examples of each case.

The Old Ball Game: Organization of Nineteenth Century Professional Base Ball Clubs

The first professional base ball clubs came in two varieties: stock clubs, which paid their players fixed wages, and player cooperatives, in which players shared the proceeds after expenses. We argue that stock clubs were formed with players of known ability, while co-ops were formed with players of unknown ability. Although residual claimancy served to screen out players of inferior ability in co-ops, the process was imperfect due to the team production problem. Based on this argument, we suggest that co-ops functioned as an early minor league system where untried players could seek to prove themselves and eventually move up to wage teams. Empirical analysis of data on player performance and experience in early professional base ball provides support for the theory.

The Organization of Consumption

No abstract available.