Henry Phelps Brown on Wages, Productivity and the Wage Share

Abstract

Henry Phelps Brown was labour economist who brought his historian's training to the empirical analysis of wages, productivity and the wage share, for several countries, over a lengthy time-span. He pointed out the relationship between the rate of money wage increase and the level of unemployment eight years before the Philips Curve was published. Significantly through, Phelps Brown rejected any causal connection that would justify the creation of an unemployment pool as an anti-inflationary policy. His ‘climacteric’ thesis attributed the productivity slow-down in the late nineteenth century to an exhaustion of the innovatory potential deriving from steam and steel. He produced the definitive critique of the empirical applications of the Cobb-Douglas production function, although he subsequently made use of its as a theoretical tool to explain the ‘stylized facts’ which his empirical investigations produced. Phelps Brown attributed the stable trends in the profit rate, the profits share and the capital-output ratio to neutrality of invention, in association with the importance of convenction to entrepreneurial behaviour when the future is uncertain. Displacements in the trend of income shares were accounted for by entrepreneurial convention being shattered by the joint actions of trade unions and the product ‘market environment’. Phelps Brown's dedication to examining and explaining the historical record of wages, productivity and the wage share has received critical acclaim from both economic theorists and economic historians.