A question of incentive? Lionel Robbins and Dennis H. Robertson on the nature and determinants of the supply of labour

Abstract

This paper compares two articles by Lionel Robbins (1930) and by Dennis H. Robertson (1921) on the topic of labour supply. Robertson's article is shown to anticipate the main results of Robbins's seminal article. Yet, Robertson covers a number of other issues (e.g. constraints on hours worked and the impact of non-pecuniary factors) that are neglected by Robbins. Robertson's article is used to illustrate important gaps and omissions in the economics literature on labour supply that have occurred through the acceptance of some of the arguments contained in Robbins's article.

Keywords:

• Robbins
• Robertson
• labour supply
• incentives
• disutility

Notes

*I am very grateful for the comments of two anonymous referees on an earlier version of this paper. Remaining errors are mine alone.

Robbins's biographer, D. O'Brien (1988: 99), refers to Robbins's 1930 piece as ‘perhaps his most famous single article’.

The scope for workers to vary their work hours, as discussed in the following sections is likely to be very limited in practice.

Robertson's reputation within economics has largely been built on his contribution to the analysis of the trade cycle and of money and there has been a relative neglect of his work on labour supply. His 1921 paper is scarcely mentioned, let alone discussed, in the various published sources that are devoted to the work of Robertson (see Presley 1979; Fletcher 2000).

Robertson absents the usual disclaimer and admits to being at odds with his contemporaries on the questions he intends to address in his article. The latter, he declares, ‘has been subjected before birth to so much kindly criticism that I can neither acknowledge my debt nor defend my obduracies (sic) in detail’ (231n). He does not refer to any of these critics by name, however.

Robbins (1930: 123n) also draws attention to the overlaps between his own article and parts of Hugh Dalton's (1929) Principles of public finance.

Indeed, for analytical purposes, Robertson proceeds as if there was no direct monetary inducement to work activities: ‘We shall reason for the present as though the processes of exchange were conducted without the aid of money by direct barter’ (Robertson 1926: 8).

To be sure, from an opportunity cost perspective, the cost of labour in the form of the disutility of work itself can be reincorporated by consideration of the alternative uses of time in different paid occupations rather than simply in leisure and in consumption. Indeed, this advance has been made by modern writers, notably Gary Becker (1971). The problem with this sort of approach, however, is that it still insists upon reducing the incentives for work to purely monetary rewards. The principal effect of the disutility of work activities is to alter workers' reservation wage: it has little or no bearing on the way workers carry out their work tasks, which is still assumed to be predetermined at the point workers agree to work for employers. On the one hand, there is an unwillingness to deal with the issue of variable labour productivity. On the other hand, no systematic account is taken of the effects of changes in the conditions of work on the welfare of incumbent workers (see Spencer, 2004b).

For more on Jevons's and Marshall's approach to the cost of labour and its influence on the work-decision, see Spencer (2004a,b).

Robertson, in later work, suggests that the sign of the marginal utility of leisure will depend on the amount of income that workers gain from paid work. This line of argument is used by Robertson to cast doubt on the possibility for the labour supply curve to become ‘backward-bending’ except in the short run: ‘For the longer period this is much less likely to be true, since leisure is apt to become boring unless you have money to spend in it, while given time the standard of wants is apt to adjust itself, both upwards and, though of course less easily, downwards, to a change in income. Thus immediate decisions of individuals to work harder or less hard may be reversed later’ (Robertson 1957: 313).