On the Economic Approach to Institutional Organization
Chapter 5: Organizational Behavior and Capital Utilization: Modeling Human Capital as Boundedly Rational or as Asset Specific?
5. Organizational behavior and capital utilization: Modeling human capital as boundedly rational or as asset-specific? The science which underlies each workman’s act is so great and amounts to so much that the workman who is best suited actually to do the work is incapable . . . either through lack of education or through insufficient mental capacity. (Taylor, 1911, p. 41) Transaction cost economics maintains that governance structures must be crafted more carefully as the degree of human asset specificity increases. (Williamson, 1985, p. 243) This chapter explores how Taylor, Simon and Williamson modeled skills and skills utilization in their organization theories. It suggests that organizational economics analyzes and intervenes with skills utilization in non-behavioral terms (in relation to incentive structures), skills being approached as human capital. The chapter questions whether organizational economics could conceptualize skills and skills utilization in behavioral, cognitive psychological terms, that means in relation to the question of human nature. It argues that, in certain respects, Taylor, Simon and Williamson, especially Taylor and Simon, conceptually drifted between an organizational economic and a behavioral approach to skills management. This yielded certain problems for their organization theories. Sections 5.1, 5.2 and 5.3 explore these arguments for Taylor’s, Simon’s and Williamson’s organization theories, respectively. Section 5.4 concludes the chapter. 5.1 TAYLOR’S ANALYSIS OF HUMAN CAPITAL: BETWEEN COMPETENCE AND INSUFFICIENT MENTAL CAPACITY Taylor suggested that certain cognitive psychological features of human nature were important for analyzing skills formation and management. This section assesses how far, with what success and for what purpose Taylor...
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