Monday, January 13, 2014

Dennis Robertson's "Wage Grumbles"

To simplify, the factors of production are land, labor, and capital. The marginal productivity of labor is the extra output produced by an infinitesimal increase in labor, holding the quantity of all other factors constant. What does it mean to hold the quantity of capital constant? Dennis Robertson thought about this:

"If ten men are to be set to dig a hole instead of nine, they will be furnished with ten cheaper spades instead of nine more expensive ones; or perhaps if there is no room for him to dig comfortably, the tenth man will be furnished with a bucket and sent to fetch beer for the other nine." -- Dennis Robertson (1931).

I do not know that I have ever read Robertson. But I have seen the above passage often quoted (e.g., in Miller 2000) or alluded to (e.g. in Harcourt 2014).

Anyways, here we see, in a micro-economic context, a constant quantity of capital, measured in numeraire units, with a variable form. The Cambridge Capital Controversy showed this notion to be untenable. And this quote is another demonstration that the CCC was about more than macroeconomic models with aggregate production functions, such as the Solow model of economic growth. We also see that, once, some did not find odd the idea of beer breaks.

  • G. C. Harcourt (2014). Cambridge-Style Criticism of the Marginal Productivity Theory of Distribution, Proceedings of the American Economic Association. Philadelphia, PA (3-5 January).
  • Richard A. Miller (2000). Ten Cheaper Spades: Production Theory and Cost Curves in the Short Run, Journal of Economic Education (Spring): pp. 119-130.
  • Dennis W. Robertson (1931). Wage-grumbles, Economic Fragments. [I DON'T KNOW THAT I EVER READ THIS.]

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