Provisional conclusions

So far, I have considered the relationship between labour and capital at the firm level, while taking into account some implications of market clearing. Two main conclusions stand out. In a world of complete markets with labour mobility, no specific gains should be expected, in equilibrium, from action by labour at the firm level: labour-management equilibria correspond to competitive (wage) equilibria. In a more realistic world of uncertainty with incomplete markets, efficient risk-sharing between capital owners (holding diversified portfolios) and workers (unable to protect their human capital through diversification) is not organised by the market and requires instead sophisticated contractual arrangements.

In the capitalist system, labour contracts (explicit or implicit) are the institutional support of such arrangements. Under labour management, equity contracts would be needed to the same end, but do not seem to be in systematic use, either in Yugoslavia or in capitalist countries.

Uncertainty is the standard instance of incomplete markets, but it is by no means the only one. In so far as labour services are concerned, working schedules and working conditions are other significant instances. As indicated already in chapter 1, these are in the nature of public goods – on a par with the investment decisions considered in chapters 2–4. These decisions do not seem to be fully guided by market-clearing prices, and require some form of collective decision-making at the firm level.