The Theory of Effort and Welfare Economics

i. Modern value theory is a demand theory. Unlike the earlier theories of the classical economists who were ever aware of the struggles of man to wring a living from nature, value theory now lays little emphasis on the sacrifices involved in work and approaches the subject from the starting point of the consumer engaged in maximising his satisfactions. Modern welfare economics likewise concentrates wholly on the economic welfare derived from consumption. Anything which, ceteris paribus, increases satisfactions, that is, increases the volume of goods and services for consumption, whether by better allocation of resources or improved technique, increases economic welfare. This emphasis on satisfactions has involved the almost complete neglect of dissatisfactions and the gradual disappearance from economic literature of such terms as disutility and real cost . The reason for this state of affairs, so far as welfare theory is concerned, is the assumption that a balance is always struck by the individual at the margin between effort and reward, and that it is not therefore possible that an increase in satisfactions may be more than counterbalanced by the dissatisfactions involved in obtaining them. The validity of this assumption and the place of dissatisfactions in economic theory stand in .need of a re-examination. This article is an attempt to contribute towards this, first, by re-examining the dissatisfactions which arise from work, secondly, by pointing out the bearing of these dissatisfactions on welfare economics, and, thirdly, by indicating their bearing on industrial relations

Ceteris paribus · Consumption (sociology) · Economics · Market economy · Microeconomics · Neglect · Positive economics · Public economics · Sociology · Value (mathematics) · Welfare · Work (physics) · Economic Theory and Institutions · Psychology