On the economic theory of the labor-managed firm in the short run

This paper proposes a short-run utility-maximizing theory of the labor-managed firm (LMF), and shows how four previous theories can be derived from it. It is argued that one of the models, by Horvat, should be viewed as a type of satisficing theory for the LMF. In contrast to the theory of the conventional capitalist firm, it is the satisficing variant that provides efficient resource allocation. This paper also shows why comparative-static analysis may not be as accurate a predictor of short-run behavior of the LMF as it is for the profit-maximizing firm. Consideration is given to microeconomic policy in a socialist labor-managed economy.