Wednesday, October 17, 2018

William Nordhaus, 2018 "Nobel" Laureate, On Labor Values

Suppose one wants to quantitatively measure the growth in productivity over centuries. And one wants to look at specific commodities that can be said to have existed over such a long time. Think of a lumen of light or a food calorie. How can one do this? The definition of a price index over such a long time period is questionable.

Adam Smith addressed this problem. Some would find his approach common sense. One could ask how long must a common laborer work to be able to afford the commodity in question. More recently, William Nordhaus considered the question. He, too, advocated the use of a Smithian labor-commanded standard to measure technological change. (I haven't read the reference below in decades.)

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