Divison of Labor, Organizational Coordination and Market Mechanism in Collective Problem-Solving

This paper builds upon a view of economic organizations as problemsolving arrangements and presents a simple model of adaptive problemsolving driven by trial-and-error learning and collective selection. Institutional structures, and in particular their degree of decentralization, determines which solutions are tried out and undergo selection. It is shown that if the design problem at hand is “complex” (in term of interdependencies between the elements of the system), then a decentralized institutional structure is very unlikely to ever generate optimal solutions and therefore no selection process can ever select them. We also show that nearly-decomposable structures have in general a selective advantage in terms of speed in reaching good locally optimal solutions. JEL classification: C63, D21, D23, L22, O30