Property Rights, Risk Sharing, and Player Disability in Major League Baseball

IN The Economic Organization Frank Knight describes five tasks performed in all economic systems. In logical order the first of these tasks is determination of what is to be produced. Knight describes the second function: "The second step, logically speaking, after the ranking and grading of the uses to which productive power may be put, is that of actually putting them to use in accordance with the scale of values thus established. From a social point of view, this process may be viewed under two aspects, (a) the assignment or allocation of the available productive forces and materials among the various lines of industry, and (b) the effective coordination of the various means of production in each industry into such groupings as will produce the greatest result."I Economists frequently have assumed that the "effective coordination" of inputs is primarily an engineering problem and have directed their attention to questions dealing with allocative efficiency. For example, Knight goes on to state that the effective coordination of inputs "properly belongs to technological rather than to economic science, and is treated in economics only with reference to the interrelations between the organization of society as a whole and the internal organization of the industries."2 Recent literature in the area of property rights and agency relationships has assumed that the effective coordination of inputs depends on the available contracting technology as well as on the available engineering