The Negotiated Economy: Ideal and History*

Abstract

In the negotiated economy an essential part of the allocation of resources is by definition conducted through institutionalized negotiations between independent decisionmaking centres in state, organizations and corporations. Institutionalized creation of consensus via campaign institutions and forced compromise via negotiating procedures and decisions are central characteristics of the negotiated economy. The article includes evidence to the fact that the present Danish economy is a negotiated economy. During a long historical process, a multi‐centred and pluralist political structure has been formed and simultaneously the discursive and institutional basis for co‐ordination of decisions made in autonomous organizations has been created. It is shown how today's wages policy, labour market policy, public expenditures policy and industrial policy are characterized by negotiation‐based economic processes. It is argued that this historical development has far‐reaching theoretical consequences. The institutional conditions presupposed in traditional economic theory for the ideal of optimal allocation of resources is enshrined in the constitutional interpretation of the distinction between the authority of the sovereign state and civil society. As a result of the evolvement of the negotiated economy these institutional conditions no longer exist. This development has made a myth of the ideal of optimal allocation of resources and challenges the interpretation of rationality in traditional economic theory.

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