Efficiency Wage (and Slavery) Efficiency: in Theory and in Time

Abstract

The formal differentiation of (i) pain incentives from ordinary rewards, (ii) of effortful from careful production and (iii) of diligent from slothful workers under labor market imperfect competition ultimately suggests that the optimal menu of contracts associates inducements to production kinds following the preference triggered by slothful workers: effortful production with pain incentives and careful production with ordinary rewards. The efficiency of the efficiency wage as interpreted by the sociological theory is therefore discerned to arise under a particular production kind and so is that of slavery its dual (undoubtedly illicit). More broadly, the confusion of the two production kinds under market and state capitalism respectively contributes to the Phillips curve and price rigidity, in the misapplication of ordinary rewards to effortful production. State capitalism jurisprudentially eliminates the risks of dismissal and redundancy and thereby lastly causes effortful production to enter stagnation.