A New Look at Political Economy
UGO PAGANO, Work and Welfare in Economic Theory, Basil Blackwell, 1985
Taking as a starting point the relationship between work and welfare as conceptualised in economic theory, Ugo Pagano's excellent book branches off into a discussion of various aspects of political economy. Two broad themes, relatively unexplored in the literature, but nevertheless important for economic theory, emerge from his analysis'
The relationship between these two themes is examined in the case of Adam Smith's celebrated example of the pin-making factory which he uses to argue that the market coordinates the division of labour in society, which in turn increases job-specific skills, and induces high levels of productivity. Pagano disputes the fact that coordination of labour in a pin-making factory, or for that matter in any factory, is conditional upon the market. He quotes extensively from the literature to show that Arrow's criticism of Smith for not being aware of the fact that interaction and cooperation can be achieved independently or exchange, was anticipated in the nineteenth century by Gioia, Babbage and Ure and later taken up systematically by Marx. These writers argued that coordination or activity in the labour-process occurs within the firm, is hierarchically structured and almost always precedes exchange.
According to Pagano, not only was Smith mistaken about how the coordination or division of labour was achieved, but he also had a defective understanding of why the division of labour increased productivity. He quotes from Babbage and Ure to show that the crucial implication of an extensive division of labour is not an improvement in job-specific skills, but the inducement of a process of de-skilling at the bottom of the hierarchy, where the production process requires general skills such as the ability to coordinate bodily movements in a particular way. This entire process increases the productivity of labour not by enhancing job-specific skills, but by disciplining and