Mark Blaug has been introduced as "perhaps the best known and most widely published historian of economic theory in the profession today."
Blaug's 1958 article, "The Classical Economists and the Factory Acts - A Re-examination" ends with the sage admonition: "There is a simple moral in all this: for some purposes a theory of economic growth is not enough."
But it is the penultimate paragraph of that article (and a footnote) that struck the Sandwichman early this morning:
In a class by itself is Fawcett's contention that pecuniary motives alone bring about the adoption of a work day that optimizes output per man-hour. This argument is open to the objection that it assumes perfect foresight. Contrariwise, Thornton's thesis amounts to a denial of perfect knowledge on the part of the entrepreneur. We should say today that entrepreneurs may have little incentive to reduce hours since the immediate effect, if wages are kept constant, is to increase costs and decrease output; whereas, a simultaneous reduction in wages under these circumstances is bound to affect efficiency adversely. Thus, employers may fail to maximize output per man-hour owing to an excessive emphasis on profit maximization in the short run. Be that as it may, Fawcett's line of reasoning clearly shows where the classical economists' treatment of hours legislation is deficient: they had no theory of the firm. [emphasis added]The footnote to the bolded sentence above states:
See J. R. Hicks, The Theory of Wages, pp. 104-10. Even on the assumption of perfect foresight, this is a clear case of private costs diverging from social costs. There is no reason why the classical economists could not have considered this possibility; the distinction between private and social costs is implicit in Adam Smith's discussion of public works.Only a pedantic Sandwichman would know (or perhaps care) that pp. 104-10 of Hicks's The Theory of Wages is actually a faithful précis of Sydney J. Chapman's Theory of the Hours of Labour! The irony contained in all this is that subsequently, in The Theory of Wages, Hicks went on to set aside the conclusions of Chapman's analysis, which he emphatically acknowledged as theoretically sound, on the "practical" grounds that:
...if the working day has previously been fixed at a length which is greater than the 'output optimum' the Union will not usually need to exert any considerable pressure in order to bring about a reduction" [because a} "very moderate degree of rationality on the part of employers will thus lead them to reduce hours to the output optimum as soon as Trade Unionism has to be reckoned with at all seriously (pp. 217-218).Compare Hicks's (1932) rationale with Fawcett's (1872):
It has been proved that the workmen can succeed when they have as good a case to urge as they had at Newcastle; and the masters would, in every instance, be compelled to yield, even were it not their interest to do so, when facts can be adduced to warrant the conclusion that the hours of labour prevalent in any particular trade are too long to secure the maximum of industrial efficiency.