l31.
The case for, and the existence of, “organisational slack” in companies was argued by Richard M. Cyert and James G. March (1963), A Behavioural Theory of the Firm. Organisational slack (the difference between maximum performance and acceptable performance) is not quite the same as Harvey Leibenstein’s X-inefficiency (the difference between maximum performance and actual performance) but it is not necessary to distinguish between them in this discussion. See Harvey Leibenstein (1976), Beyond Economic Man: A New Foundation for Microeconomics. The third essential label used in this field is “relational contracting”, which allows space in the contract for tolerance and for continuing the relationship, although either or both of the parties may be going through bad times, and may therefore be unable to deliver at a competitive price. The significance of these durable relationships is discussed by Ronald Dore, “Goodwill and the Spirit of Market Capitalism”, British Journal of Sociology, Hobhouse Memorial Lecture, 34, 1983, pp 459–482. For a technical survey, see Donald Andrew Hay and Derek J. Morris (1979), Industrial Economics.