The Wages Fund Controversy Revisited

Abstract

“The wages fund theory is the crowning instance of an untrue abstraction … and it has probably done more injury to the reputation of economic theory than any other generalization ever received into economics textbooks and then expunged from them.” These words, by James Bonar, fairly well express the view that has dominated economic thought on the wages fund doctrine for the past century. Writing forty years after Bonar, Paul Samuelson claims he has been impressed by the “falseness and emptiness of the wage fund doctrine,” stating that the controversy it inspired “constitutes one of the most sterile chapters in that dreary gap between the classical age and the revolutionary neoclassical discoveries of that last third of the nineteenth century.”