Codetermination, Collective Bargaining, Commitment, and Sequential Games



When we attempt to evaluate the efficiency of institutions, or to evaluate them from other or more inclusive normative viewpoints, it is at least helpful to compare the institutions we are evaluating with specific alternative institutions which are real possibilities. It may even be essential that we do this1 if the comparison is to be meaningful. For economics is not physics. In physics, the efficiency of a heat engine may be, and is, rated by comparison with the ideal of perfect efficiency. Although the ideal of perfect efficiency is unattainable, this procedure is meaningful because efficiency has a quantitative measure. Thus, the substantive meaning of the efficiency rating of a heat engine is a comparison with all other real, rated heat engines: i.e., a comparison of real alternatives. Now, it may be that no such cardinal measure of efficiency is possible in economics. If it is not, then only direct comparison of possible alternatives2 can supply us with substantive evaluations of efficiency or other normative evaluations of economic institutions. We should recall, however, that cost-benefit analysis aspires to a cardinal measure of efficiency. To the extent that cost-benefit analysis is an actuality, assessments of efficiency relative to an unattainable ideal may have substantive meaning. Even if cost-benefit were altogether successful in attaining this goal, however — which is at best a debatable position — direct comparisons would still be of particular interest in supplying a clear indication of how efficiency might be improved through policy reforms or other innovations.


Bargaining Power Collective Bargaining Cooperative Game Simple Game Noncooperative Game 
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