Discursive Rationality and the Division of Labour: How Cooperation Emerges

American Journal of Economics and Sociology, The,  Oct, 1999  by Jorg Guido Hulsmann

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JORG GUIDO HULSMANN [*]

ABSTRACT. One of the great achievements of economic science is the explanation of the benefits of the division of labour in market economies. However, despite its merits this utilitarian, explanation is insufficient as an account for the widespread division of labour. This insufficiency stems from the normative shortcomings of the harmony-of-interests doctrine, which cannot justify the respect of private-property titles and, therefore, cannot explain on purely utilitarian grounds the fact that the division of labour is as widespread as it in fact is. Mariam Thalos has recently provided a partial solution to this problem by arguing that religious belief in God performs a public function that facilitates human co-operation. In critical elaboration of her thesis, the division of labour is explained by taking into account a different aspect of human reason, namely, discursive rationality.

I

The Utilitarian Theory of the Division of Labour

ON THE MARKET, the division of labour is organised by the exchange of private-property titles. Why and under which circumstances do these exchanges take place? Economists have demonstrated that any two individuals may profitably engage in a division of labour. Thus assume the most elementary setting of two individuals A and B both of whom desire two kinds of products x and y. Considering the productivity of A and B, one can distinguish three fundamental cases.

1) A is more productive than B in making X, while B is more productive than A in making y. It will, then, be to the advantage of both A and B that A specialises in the production of X while B specialises in the production of y. In this way they can realise the benefits springing from the productivity differential between them. The overall product of both x and y will be increased so that A and B can consume more of both goods. [1]

2) A is more productive than B in making both x and y. In this case there seems to be nothing that B could give to A so that no division of labour could emerge. However, if A is relatively more productive in x than in y, then they can still specialise in a way beneficial to both of them. [2] A would specialise in the production of x while B specialises in the production of y. However, they could not engage in perfect specialisation, as in the first case. Only one of them can specialise entirely in "his" production, while the other one would also have to engage in the other production.

3) A and B are equal in the production of both x and y. Here no productivity differential exists that would make a division of labour among them worthwhile. However, a specialisation is still advantageous to both of them because it enables them to realise economies of scale. [3]

Hence, purely utilitarian considerations show that advantageous cooperation is possible between any two individuals. The utilitarian approach has the undeniable merit that it gives a rational account of this fundamental phenomenon of society. There is no need to have recourse to nonexplanations like man's "propensity to truck and barter" or his being a "political animal." Human beings divide labour amongst themselves because it is in their rational interest to do so. And precisely because such a rational account is possible, economic science can serve as a tool to spur the growth of civilisation. The economist can convince his fellow citizens of the blessings of peaceful co-operation.

However, despite these merits the utilitarian approach is insufficient. This is what we will try to show in what follows.

II

The Double Failure of Utilitarianism in its Account of the Division of Labour

IN A SEMINAL CONTRIBUTION to the ethical foundations of the market economy, Murray N. Rothbard trenchantly criticised Ludwig von Mises' harmony-of-interests justification of private-property rights. According to Mises, it is in the long-run interest of all members of society that property rights in the means of production are respected. Therefore, everyone should respect private property rights and the contracts based on these rights. However, as Rothbard pointed out, there is no a priori justification for just taking long-run interests into account. There are persons with a high time preference, that is, who prefer present or immediate consumption over more remote consumption, and these persons could well have an interest in breaking the contract they made or in other violations of property rights. Thus, Mises' utilitarian argument cannot rationally justify why contracts should be fulfilled or, more generally, why the market should remain unhampered by violations of private-property rights. [4]

Now, this critique goes beyond the realm of normative discourse and brings up an important challenge for positive economics. For, on the one hand, it is a fact that all economic theories of the division of labour are utilitarian in nature and, on the other hand, it is a fact that the division of labour is very widespread. But how can human co-operation be so universal given that there is no a priori reason to believe that human beings have mainly, or most of the time, long-run interests? One could claim that as a matter of empirical fact, most human beings have a rather low time preference. The division of labour would thus stem from this universal inclination or tendency of man toward long-run projects. Yet clearly such a low time preference is not characteristic for the human race at all places and at all times, and this refutes any low-time-preference-by-nature claim.