Evolutionary Game of Labor Division in a Perfectly Competitive Economy

This paper inspects the coordination of individuals’ decisions on specialization and the determination of labor division in a large competitive economy from a perspective of evolutionary game theory. It is shown that the equilibrium structure of labor division defined by new classical economics is in fact an evolutionarily stable state. In an evolutionary economic environment where the law of “survival of the fittest” prevails, individuals’ pursuits of self-interest can spontaneously lead to a steady state of labor division without any central planning or bargaining processes that coordinate individuals’ decisions in an intended way. In this state, resource allocation is not only Pareto efficient, but also beneficent as if it was chosen by a welfare planner who holds a welfare criterion with aversion of inequality.