The Provision of Collective Goods Through a Social Division of Labour

This paper develops a general equilibrium framework in which collective goods are provided by specialised professionals as part of an endogenously emerging social division of labour. It merges an economy with collective goods with the model of a private-goods market economy with an endogenously emerging social division of labour. Our approach is founded on the notion of a consumer-producer who endogenously select a profession, thereby inducing an endogenous 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 investigate its effects on equilibrium prices.