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On Custom in the Economy$
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Ekkehart Schlicht

Print publication date: 1998

Print ISBN-13: 9780198292241

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198292244.001.0001

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The Division of Labour

The Division of Labour

(p.242) Chapter 14 The Division of Labour
On Custom in the Economy

Ekkehart Schlicht

Oxford University Press

Smith's theorem—that the division of labour is limited by the extent of the market—is explained. But there exists another limitation to the division of labour that relates to the nature of the task. Further, the division of labour can be coordinated alternatively by markets or by the coordination mechanisms available within firms that rely heavily on custom. It is argued that coordination within firms entails productivity advantages at the expense of inflexibility in certain dimensions, whereas the market requires standardization of some sort, but is more flexible in other ways.

Keywords:   custom, division of labour, firms, flexibility, markets, productivity, Smith's theorem, standardization, task interdependence, task separability

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