What You Do at Work Has No Effect on Your Utility or Well-Being. Oh, wait…

Various sources have been pushing me lately to read Ian Steedman‘s work.

Right out of the gate, I come upon this aha! paper:

The welfare of almost all employed people is significantly affected by how they spend their working hours — and not just by how long they work and what they can purchase with their earnings. Yet this brute fact is all but ignored in welfare economics!

Let us call to mind the familiar but pivotal welfare economics analysis of Robinson Crusoe. Faced with given technical possibilities of production and fixed supplies of land and labour, Crusoe will ‘first’ identify efficient resource allocation points on the production contract curve — and hence on the production possibility frontier. In a `second’ logical step he will choose from amongst the output combinations lying on that produc- tion (and consumption) frontier according to his preference ordering over consumption bundles. Only such bundles influence his welfare. In a more complete version of the analysis, Crusoe would be supposed also to choose how much time was devoted to work and how much to leisure, his welfare now being dependent only on his consumption of commodities and his total leisure time. In neither the simpler nor the more complete analysis would Crusoe’s welfare be affected in the least degree by his working activities per se; only total working (leisure) time and the commodity outputs from that working time are held to be relevant to welfare.

Now … How many employed people do our readers know whose welfare depends only on their total leisure time and their consumption, having nothing whatever to do with how they spend their working hours? … This glaring omission certainly cannot be defended by any `realism of assumptions does not matter’ style of argument, since such an argument cannot be made within welfare economics, with its many untestable conclusions (cf. de V. Graaff, 1967, p. 3). Nor can it be defended on the grounds that the issue is very difficult to incorporate in welfare analysis, or on the grounds that its incorporation makes little or no difference to the conclusions reached. This essay will show both that the importance of working conditions for Robinson Crusoe’s welfare can readily be handled within the standard welfare theory framework and that recognition of that importance does indeed have a notable impact upon familiar welfare theory propositions.

Sorry, gated: Welfare Economics and Robinson Crusoe the Producer, Metroeconomica, 2000, 51(2), 151-167.

Update: See further on the implications of Steedman’s thinking:

Job Satisfaction and Elasticity of Labor Supply