The volume ‘Systems of Production’ tried to answer the question: can social policy be a productive factor? Traditional neo-classical economic models tend to view progressive social policy in the form of regulation and transfer payments through the tax system as a cost to business and a drain on enterprise. A dynamic institutional approach to economic theorising offers potentially different results.
When social policy becomes enabling to individuals and groups in society, and increases capabilities and opportunity, productivity in the economy can actually be enhanced. But it is difficult to measure such relationships, isolating certain causes of increasing productivity and linking them to particular social policies.
The prospect of intelligently designed social policies therefore give societies and polities a choice. Progressive social policies which involve, for example, labour rights, need not negatively affect enterprise. To the extent that cooperation in the workplace can enhance business performance, but may sometimes not take place due to competitive pressures, legislating for workers’ representation and encouraging cooperation can be a positive force for the economy.