What is a hierarchy?

In organizations or hierarchies some individuals have authority to issue orders that others are expected to obey and face penalties if they do not. The organization's members are paid, but generally not for performing particular actions. Workers are paid for their cooperation and pay is often agreed upon before work starts. A worker may not have rights to negotiate additional payments for particular tasks.

The boss need not consult her subordinates when making decisions. A given hierarchy may contain multiple levels, each containing persons who simultaneously carry out the orders of superiors and issue orders to subordinates. The boss promises steady wages that beat income from self-employment and sweetens the deal by making the wages independent of small fluctuations in group output or price, at least for the near term. The workers accept that the boss may reassign them as she wishes and fire them if she chooses. She alone chooses who will replace a fired worker or fill some vacancy. Her income is the difference between the group's revenue and its bills for wages and supplies. If that figure is negative she is responsible for obtaining the funds, from outside the business if necessary. If this new organization improves productivity and profit both she and the workers share the gains.