Human fallibility and economic organization
Raaj Kumar Sah and Joseph E. Stiglitz
American Economic Association Papers and Proceedings, Volume 75, Number 2, May 1985, pages 292-297.
(Post-publication note. This paper does not include an abstract. The excerpts below are from the paper.)
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The view we take here is that “to err is human,” and that different organizational systems differ not only in what kinds of errors individuals make in them, but also in how the systems "aggregate" errors. As a result, organizations differ systematically in the kinds of errors they make, and thus in their overall performance. The objective of our research program has been to construct stylized models of an economic organization within which the consequences of alternative organizational architectures can be examined.