Ex-Ante Analysis and Wage Theory

Abstract

ATTEMPTS to understand and make use of the concepts ex-ante and ex-post, as used by the Swedish school of economists, have never yet yielded me anything more useful than a headache, so that although I have long suspected that ex-post is an unnecessary prefix to the actual quantities and prices discussed in economics, while ex-ante is nothing but a more or less confused idea of a schedule which has not yet been completely emancipated from the idea of a quantity (or, less frequently, a price), I have been a little afraid that my suspicions rested on too subjective a basis. It was therefore very pleasant to find a clear justification of my suspicions in the work of no less an authority on the Swedish school than Professor Ohlin himself. In an article' where he is simply giving an account of the Stockholm School and his own theory of saving and investment, ex-ante refers quite clearly to definite quantities (and perhaps also prices) and not to schedules at all. Thus Professor Ohlin says: Let us now turn to a comparison of the ex-post and ex-ante concepts. Every one of the former has got a corresponding one among the latter,2 and speaks, e.g., of the inequality of Sa (ex-ante savings) and Ia (ex-ante investment) . Ex-ante income, or investment or what not, is a definite quantity or value (or price)-the item as it is expected before it actually comes about. That is why it is called ex-ante. The expectation is liable to turn out wrong, so that when we see afterwards, or ex-post, what the item actually did amount to, we can measure the degree of error in the divergence between the ex-ante estimate and the ex-post actuality. I wish to stress that in this use ex-ante, like ex-post, refers to a single definite