The provision of collective goods through a social division of labour

We develop a general equilibrium framework in which a wide range of collective economic configurations are provided through specialised professionals as part of an endogenously emerging social division of labour. We extend the theory of value to this setting bringing together a model of an economy with collective goods with the model of a private-goods market economy with an endogenously emerging social division of labour. Natural applications are the presence of non-tradables in production, the effects of education on productive abilities, and the market system itself as an implementation of the price mechanism. For an appropriately generalised notion of valuation equilibrium, we prove the two fundamental theorems of welfare economics under very general conditions, notably allowing for incomplete, non-monotonic, and non-transitive preferences. We also incorporate Adam Smith's principle of increasing returns to specialisation and establish that there emerge well-structured social divisions of labour in equilibrium. (c) 2020 Elsevier B.V. All rights reserved.