Wage Fund Research Articles

John Vint, Capital and Wages: A Lakatosian History of the Wages Fund Doctrine, Edward Elgar, 1994, x+278p.

John Vint, Capital and Wages: A Lakatosian History of the Wages Fund Doctrine, Edward Elgar, 1994, x+278p.

William Thomas Thornton’s ‘The True Consequences of the Repeal of the Corn Laws’ with an Introduction and Annotations

In early 1841, William T. Thornton (1813-1880) accepted an invitation to address members of the Travellers' Club on the divisive issue of the repeal of the Corn Laws. Until his return to England in 1835, Thornton had led a peripatetic life, initially travelling to Malta in the 1820s where he resided with a well-connected relative, Sir William Henry Thornton, the Auditor-General, before sallying off to the Ottoman capital, Constantinople, where he secured employment on the staff of the British Consul, John Cartwright. When he returned from the Levant he settled in London where he gained employment at the East India Company, a position secured through family connections. Thornton had been appointed to the lowest rung within the Company's administrative structure, but he was now confidently making his way in the world and seemed destined for bigger things. At some stage between his return to London in 1835 and his presentation to the Travellers' Club in 1841 the foundation for his life-long interest in political economy was laid. This interest led initially to his embarking upon an examination of the economic impact of the Corn Laws, followed by the Travellers' Club presentation and finally the penning of a little-known pamphlet titled The True Consequences of the Repeal of the Corn Laws (1841), judiciously published by Effingham Wilson, a London bookseller renowned for issuing material other London publishers were reluctant to handle. This pamphlet, which has never before been republished, is reproduced in full below. Its publication can be justified on several grounds. First, even though the pamphlet constitutes Thornton's earliest efforts as an economic writer it has only ever been acknowledged in the literature by Grampp (1956), whose passing reference to it was accompanied by a very peculiar reading of Thornton on the Corn Laws and money wages. Second, it should be understood that the pamphlet is a piece of comparative juvenilia that contributed to the wider economic debate on agricultural protection along partisan lines. For example, Thornton's use of a simplistic wage fund construction to determine money wages allows the reader to better gauge how far he had travelled by the 1860s when he presented a more sophisticated critique of the wage fund in terms of supply and demand theory. Third, the impression of juvenilia is reinforced by tracing the approach that Thornton adopts when accounting for changes in the pattern of trade after repeal. His study is quite compatible with, and the language indicates that it was constructed in terms of, an absolute advantage argument rather than along Ricardian comparative advantage lines. Fourth, his view of the incidence of tax, although largely correct, is open to criticism due to the narrowness of its premise. Fifth, the pamphlet anticipates a number of economic topics that Thornton canvassed more thoroughly in his Overpopulation and Its Remedy (1846) and A Plea for Peasant Proprietors (1848), both of which received handsome notices in the leading Victorian periodicals of the day. From this perspective, Thornton's pamphlet may be seen as representing a capsule summary of the two more assured works he published during the late 1840s which announced his arrival as both an important and a new economic voice.

A Policy-Constrained Wage Fund Allocaton Model For Payment Medium Selection in Compensation Planning

The U.S. labor force currently receives 80% of National Income through a variety of cash and in-kind compensation form. Employers use more than 80 different forms of compensation, herein called payment medium, to deliver employee wages. How firms select the set of payment offered to their employees is the focus of this study. Some firms recognize that flexible compensation, i.e. giving employees a choice among alternatives, may allocate compensation more effectively. This view underscores the belief that labor's need satisfaction may be complementary to the firm's interest and goals. This belief is not new, but its recent recognition in cafeteria type programs revives an interest in how to match individual employee need satisfaction with a firm's objectives. Given that firm and employee relationships are complex and dynamic, is compensation planning possible? This question addresses the problem of integrating firm goals, employee needs, and available resources into a dynamic planning method. Corporate financial and human resource policies in this problem are inextricably related. This study develops a method for planning corporate compensation policy. The proposed planning method evaluates alternative compensation policies congruent between firm and employee goals. Corporate policies, payment media and employee requirements are explicitly identified and a decision model is constructed using goal programming.

What recantation? The wages fund doctrines of J.S. Mill in light of Smith, and Ricardo

PurposeThe purpose of this paper is to investigate the various forms of the classical wages fund, and especially the claim that J.S. Mill reversed his position on the nature of the wages fund.Design/methodology/approachTextual research from original publications of Adam Smith, David Ricardo and J.S. Mill, as well as references to current interpretations of their work are used in this paper.FindingsAlthough J.S. Mill was a supporter of the classical wages fund model, he did not consistently embrace its assumption of a fixed fund. His comment in his Principles that the “discretion of the capitalist” influences the size of the fund contradicts this assumption. Without consistent support for this component of the doctrine, the “recantation” loses its historical significance, in that it is simply a reaffirmation of the views which Mill held throughout.Research limitations/implicationsIt is hoped this paper can close the book on the debate on Mill's supposed recantation. There was no recantation because Mill held no firm position to recant.Originality/valueIt is understood that no one has made the connection between Mill's recantation and his other inconsistencies regarding aspects of the wages fund.

A post‐Keynesian model of output, employment and monetary demand

This paper presents a simple model based on three broad Post‐Keynesian hypotheses: (1) the economic process develops over time; (2) money is endogenous; and (3) producers are price setters. To make the analysis easier we also assume (4) that firms are vertically integrated. Producers assess the expected demand and ask banks for credit in order to start production; banks create credit at the request of producers to finance the wage bill; workers buy goods sold by firms; firms must repay banks the amount borrowed plus interest and earn a target rate of profit. Since firms have created only as much purchasing power as they have advanced to workers in the form of the wage fund, equilibrium requires that there is an amount of autonomous monetary demand equal to profits and interest. Furthermore, in order to make the value of supply equal to the value of effective demand, firms will employ the number of workers necessary to create the purchasing power which, when added to the anticipated autonomous demand, enables all costs to be covered and the planned rate of profits to be attained.

3 Laveleye: A Critic Ripe for Conversion

Emile de Laveleye (1822-1892), professor of political economy at the University of Liege, and later Baron de Laveleye, was a Belgian scholar and publicist, whose observations on Henry George first appeared in a brief article published in January 1880 in the Revue scientifique de la France et de l'etranger. (1) Later he wrote a much longer commentary that appeared in the London Contemporary Review of 1882. (2) Laveleye's first article adopts a somewhat ambivalent position in relation to George. The beginning and the end are highly laudatory: il m'a instruit et m'a fait reflechir, he writes of Progress and Poverty near the beginning, while toward the end he waxes enthusiastic for the single tax doctrine: Elie est si simple et d'une si grande portee pour l'avenir, qu'elle aurait chance d'etre accueillie. Indeed, in his very last sentence Laveleye claims to have justified and developed the idea himself in an earlier work, to which I shall have need to refer later. Yet there a passage in the middle that appears more critical. George taken to task for not considering the burden of military expenditure and of other government exactions upon labour: this ignores such sections book 9, chapter 4. There a part of the article, moreover, which distinctly socialistic in its tendency, and to this too I shall later return. Laveleye's second article also by no means hostile, although it contains certain undeniably critical passages. As C. A. Barker noted in his biography of George, Except for a private communication which this reviewer presently sent the author, it would be hard to say to which side his judgment leaned. But he assured George that in his net opinion Progress and Poverty was a book to be admired, and he offered compliments on the huge success of the English editions. (3) Laveleye's arguments fall under several heads. He commences by making some interesting comments on the nature of economics a science, and its connexion with morality. He then raises criticisms of George that relate to the Malthusian and wage fund theories. These criticisms are largely similar to those raised more fully by later writers, but introduce a few points of Laveleye's own. George, he argues, is wrong in stating that this increase [i.e., the increase in rent] the sole cause of the inequality of conditions, contending that the constant increase of capital [is] no less important. (4) Finally, Laveleye moves from the posture of a negative critic to advocate a position of his own, for he was the author of important works on historical analysis and social theory, whose conclusions he contrasts with those of George. It convenient to examine the wage fund arguments in the chapter that mainly concerned with the views of W. H. Mallock, while the other points will be discussed here. Laveleye's discussion of the nature of economics a study perhaps least vital to the argument, since it quite possible to agree with his views in toto without dissenting from any important conclusions drawn by Henry George. Nevertheless, the topic has some fascination. George taken to task for the proposition that economics as much a science geometry. (5) The parallel may be closer than either George or Laveleye realised. Euclidian geometry and most of George's economics turn on a priori reasoning. The geometer discusses the properties of (say) lines and triangles, although there no such thing in the whole order of nature a line or a triangle he defines those terms. George's a priori approach to economics contrasts sharply with the a posteriori approach that now so common in the social sciences. The Nature of Economics The a priori approach common to George and the geometer has much to commend it. Suppose, for example, that the modern economist with his a posteriori reasoning wishes to study the relationship between inflation rates and economic growth. …

Wages fund, high wages, and social conflict in a classical model of unemployment equilibrium

The aim of the paper is to provide an explanation of involuntary unemployment in a classical (post-Ricardian) framework. The model describes a three-stage bargaining process with four agents (governments, firms, unions, workers). In the first stage, firms determine the wage offered, following a short-run version of the wages fund theory. In the second stage, unionists determine the wage demanded, which depends on workers' tendency to conflict, while firms decide the number of employed under a "right to manage" hypothesis. In the third stage, governments tax the wages fund and pay unemployment benefits. Public intervention is subject to a trade-off between accumulation and legitimation.

Wages fund, high wages, and social conflict in a classical model of unemployment equilibrium

The aim of the paper is to provide an explanation of involuntary unemployment in a classical (post-Ricardian) framework. The model describes a three-stage bargaining process with four agents (governments, firms, unions, workers). In the first stage, firms determine the wage offered, following a short-run version of the wages fund theory. In the second stage, unionists determine the wage demanded, which depends on workers’ tendency to conflict, while firms decide the number of employed under a “right to manage” hypothesis. In the third stage, governments tax the wages fund and pay unemployment benefits. Public intervention is subject to a trade-off between accumulation and legitimation.

How Mill should have replied to Thornton

In Negishi (1986), I developed my view on the so-called Mill's recantation of the wages fund doctrine, the short-run theory of wages in the classical school of the economics. According to a survey article on the recent John Stuart Mill interpretations, “a further twist to the debate has been given by Negishi (1986). He reminds us that Mill, in the 1871 edition of the Principles, retracted some of his earlier enthusiasm for Thornton. There he in effect rejected the idea that disequilibrium trades in any way undermine the importance of the principle of the equality of supply and demand, and cautioned that it was too early to adduce any firm conclusions from the discussion engendered by Thornton's book”(De Marchi, 1988).I have three purposes in this present article. The first one is to offer a Japanese version of Negishi (1986), which I think it worthwhile, since there are still no Japanese translation available of the related literature referred and quoted there, i. e., Thornton (1869), Mill (1869) and Thornton (1870). Secondly, I wish to record the appearance of some related literature published in 1990's, like Ekelund (1997), Forget (1991), Fukagai (1995), Mawatari (1997), Mirowsky (1990), Negishi (1998), Vint (1994), and White (1994). Particularly, I wish to make some detailed rejoinders to comments given by Mawatari (1997).The final one is to consider, from the point of view of the modern economic theory (Arrow and Hahn (1971), pp. 324-346, and Negishi (1972), pp. 207-227), how Mill should have replied to Thornton, who asked the significance of a small amount of trade at equilibrium prices, which are arrived after a great bulk of goods were already sold at disequilibrium prices (Thornton, 1869, pp. 53-54; 1870, p. 65). As is easily seen at a glance at Figures 6, 7 and 8 in the text of the present article, i. e., those of box diagram and of utility frontier, the importance of the final small amount of trade at equilibrium prices is that the Pareto optimality is assured.

William Thomas Thornton on Trade Union Efficacy: A fraction too much friction

William T. Thornton's contribution to developments in late nineteenth century political economy is generally associated with his criticism of John Stuart Mill's 'supply and demand' theory of value and his attack on Henry Fawcett's version of the wage fund doctrine. In a Fortnightly Review article (published in May and June 1869) on Thornton's book, On Labour, Mill publicly deferred to Thornton's criticism of the wage fund doctrine but did not accept his criticism of the theory of value. There is another aspect of Mill's review article, however, which historians of economic thought seem to have overlooked: his enthusiastic discussion of Thornton's treatment of trade union efficacy and industrial co-partnership. The question explored in this paper is whether Thornton's work on labour relations, trade union efficacy and cooperativism helped shape Mill's own thinking on these subjects during the 1860s. We begin by documenting Thornton's views on trade unionism and then examine Mill's evolving sympathy toward trade unions-an important feature of his social reform program. It is sometimes claimed that nineteenth century economists tended to ignore the role played by trade unions in industrial society. This paper points out that Mill and Thornton, two leading economists during the second half of the nineteenth century, did not oppose trade unions and were favourably impressed with the advantages for society of labour combinations. Nonetheless, they looked forward to the gradual supplanting of the system of collective bargaining by 'higher' cooperation.

One step ahead: Thornton versus Longe

This Paper addresses the intriguing issue of whether William Thomas Thornton plagiarized Francis Longe's (1866) pamphlet denouncing the classical wage fund doctrine. In doing so, the paper comprehensively reviews all of the corroborative evidence surrounding the plagiarism allegation laid against Thornton, drawing particular attention to a little known letter to The Times written by Thornton, in an effort to clear his good name of any impropriety. It is the conclusion of this paper that Thornton has no case to answer; the evidence not only from Thornton's own early work on wages and trade unions, together with additional corroborative evidence suggests that far from having plagiarized Longe's (1866) work, Thornton apticipated many of his ideas.

John Elliot Cairnes and the ‘Rehabilitation’ of the Classical Wage Fund Doctrine

John Elliot Cairnes is primarily remembered for his defence of the classical wage fund doctrine, and for his attempt to revive the classical system of economic thought in the mid‐1870s. In contrast with this standard textbook appraisal of Cairnes, the Jevons–Marshall–Vint thesis contends that, in attempting to revitalize the doctrine, Cairnes in fact explained away so much of what characterized it that its final form bore little resemblance to the doctrine held by his classical predecessors. In this paper we dispute the Jevons–Marshall–Vint thesis and argue that Cairnes’s recasting of the doctrine did fit entirely within the classical framework. Why Cairnes should have rallied in support of a doctrine by then widely condemned, partly because of Mill’s alleged retraction of it and partly because of newly emerging ideas on wages and unions, is not difficult to explain. The recurring economic stagnation in Ireland, which acted as a bulwark against industrialization there, together with the social, moral and economic dilemma created by the growth of trade unionism in Britain, presented political economists with a particular set of problems. For these, as Cairnes saw it, classical political economy, as a coherent method of analysis, provided the best hope of showing the way towards possible remedies.

FURTHER REFLECTIONS ON THE MACHINERY QUESTION

This paper re-examines Ricardo's argument on machinery in the light of Samuelson's recent attempt to add new force to the long stream of its interpretations. This attempt is partly criticised and partly re-utilised to produce a new reconstruction of that argument. This reconstruction is carried out by disentangling the long-run effects of inventions from the short-run effects of the conversion of circulating into fixed capital; and by arguing that both Ricardo II (the author of the machinery chapter) and Ricardo I (the author of the 'previous opinion') are right. The paper also argues that the phenomena of technological unemployment and of changes in technical coefficients, however implicit, do not constitute the core of Ricardo's argument. These conclusions are reached on the basis of the theoretical implications of the classical distinctions between value and wealth, and between free capital (wages fund) and invested capital.

Cantillon on real wages and employment: a rational reconstruction of the significance of land utilization*

It is quite a fundamental proposition of Richard Cantillon's Essai sur la Nature du Commerce en General (1755) that employment and population bear a negative relation to the level of real subsistence wages - a form of wages (or subsistence) fund doctrine. This paper presents a 'rational reconstruction' of Cantillon's system and the relation between real wages and employment within it. It seeks thereby to clarify the difficulties in the way of this doctrine operating in a market economy constructed along Cantillonian lines - as opposed to a Cantillonian command economy. These results are contrasted with a model of Cantillon by Hans Brems.(This abstract was borrowed from another version of this item.)

Mill’S Affirmation of the Classical Wage Fund Doctrine

Commentaries on Mill's1 recantation have variously and loosely interpreted his retraction within an institutional context (Kurer, 1993), as a tract on policy reform (Schwartz, 1972, esp. pp. 68–69, 90–101; West and Hafer, 1978, 1981), as a calculated political act (Forget, 1992), as part of a scientific research programme (Vint, 1994, esp. pp. 1–7, 212–248), or as broadly revisionist (Hollander, 1968a, 1984, 1985, pp. 262–263, 409–417; Ekelund, 1976, 1985; Ekelund and Kordmeier, 1981; Negishi, 1985a, 1985b). Although these writers differ on many points of detail, they all agree that Mill explicitly and unconditionally abandoned the wage fund doctrine. What is striking here is that the ‘recantation interpretation’ has gone entirely unchallenged by historians of economics. In this paper we challenge received opinion on this point and argue that Mill in fact affirmed the doctrine in his Fortnightly Review article.

W. T. Thornton: Savant, Idiot, or Idiot-Savant?

Renewed interest has been kindled in the status and “meaning” of William T. Thornton (1813–1880) in the history of economic thought. Thornton is often credited, rightly or wrongly, with re-orienting J. S. Mill's thought on the wages fund—a critical cornerstone of classical economics. While Thornton's actual influence on Mill in this matter

Capital and Wages: A Lakatosian History of the Wages Fund Doctrine

For almost a century the wages fund doctrine played an important role in Classical economic thought, forming the theoretical basis of the Classical analysis of the labour market, and was employed by political economists and popularises of political economy when discussing the role of trade unions, the impact of machinery, the effect of the Poor Law, and other policy issues. In Capital and Wages John Vint applies Imre Lakatos's methodology of scientific research programmes (MSRP) to the history of wages fund doctrine to analyse and appraise its development and decline. After discussing the initial theoretical leaps that the wages fund doctrine made in the hands of Ricardo, Senior and Mill, John Vint argues that this progress came to a halt 'n the 186Os. He then analyses the major debate on the doctrine which took place in the 1860s by using the tools and concepts of the Lakatosian framework. This important book rationally reconstructs the wages fund doctrine and the recantation debate as 'scientific' and provides evidence that the methodology of historiographical research continues to make theoretical progress. It will be welcomed as a significant contribution to the history of economic thought and to our understanding of the development of Classical economic thought.

John Stuart Mill’s Wages Fund Recantation: A Lakatosian Analysis

There has been a number of attempts to interpret John Stuart Mill’s recantation from the Wages Fund doctrine in 1869. This article attempts to analyze the recantation using a framework which takes account of the development and decline of the wages fund doctrine as a whole. The framework is based on the work of Imre Lakatos and the article aims to rationally reconstruct the history of Mill’s recantation. It is argued that while external events were responsible for focusing attention on trades union matters in the 1860s Mill’s recantation and the aftermath can be accounted for in terms of theoretical weaknesses with the doctrine and its failure to make theoretical progress.

The wages‐and‐profits fund: Classical remnants in Marshall's early theory of distribution

Abstract This paper traces the development of Marshall's theory of wages from the late 1860s to the publication of the first edition of the Principles of Economics (1890). Section one attempts to unravel Marshall's recollections of early intellectual influences, many of which were often distorted or wrong. Specifically, J. S. Mill's, Fleeming Jenkin's and J. H. von Thünen's influence on Marshall's early theory of distribution is explored in this context. In section two, analyses of Marshall's theory of wages in Economics of Industry (1879) and in other published writings is presented. This section draws attention to the similarity between Marshall's treatment of wages and the classical wage fund doctrine. In the final section, we re‐examine Marshall's defence of his theory of value and distribution in the Economics of Industry in the face of criticism of it by American economists S. M. MacVane and J. L. Laughlin in the Quarterly Journal of Economics.

BOOK REVIEWS

Book review in this Article Institutions, Inflation and Unemployment. By Edward J. Amadeo. Accumulation, Exchange and Development: Essays on the Indian Economy. By Krishna Bharadwaj. Adam Smith's Discθurse: Canonicity, Commerce and Conscience. By Vivienne Brown. Employment, Growth and Finance: Economic Reality and Economic Growth. Edited by Paul Davidson and J. A. Kregel. Investment Under Uncertainty. By Avinash K. Dixit and Robert S. Pindyck. Employment and Technical Change in Europe: Work Organization, Skills and Training. Edited by Ken Ducatel. New Directions in Analytical Political Economy. Edited by Amitava Krishna Dutt. Monetary Theory and Monetary Policy: New Tracks for the 1990s. Edited by Stephen F. Frowen. Competition, Technology and Money: Classical and Post‐Keynesian Perspectives. Edited by Mark A. Glick. Income and Employment in Theory and Practice. Edited by Geoffrey Harcourt, Alessandro Roncaglia and Robin Rowley. Privatisation and Regulation: A Review of the Issues. Edited by Peter M. Jackson and Catherine M. Price. Labor Economics and Industrial Relations: Markets and Institutions. Edited by Clark Kerr and Paul D. Staudohar. The Nature of Economic Thought. By Johannes J. Klant. Housing, Financial Markets and the Wider Economy. By David Miles. Bureaucracy and Public Economics. By William A. Niskanen, Jr. The Economics of Primary Commodities: Models, Analysis and Policy. Edited by David Sapsford and Wyn Morgan. Economics, Power and Culture: Essays in the Development of Radical Institutionalism. By James Ronald Stanfield. Whither Socialism? By Joseph E. Stiglitz. The Theory of Wages in Classical Economics. By Antonella Stirati. Capital and Wages: A Lakatosian History of the Wages Fund Doctrine. By John Vint. The Rocky Road to Reform: Adjustment, Income Distribution and Growth in the Developing World. Edited by Lance Taylor. Universal Banking in the Twentieth Century: Finance, Industry and the State in North and Central Europe. Edited by Alice Teichova, Terry Gourvish and Agnes Pogány. The Collected Papers of Dan Usher. Volumes I and II. By Dan Usher.