intriguing and thought-provoking paragraphs

A more detailed post on efficiency wage models, as well as why I considered using one in my work, to come soon. For now, check out this excellent quote from a paper by Raff and Summers from 1986 titled, "Did Henry Ford Pay Efficiency Wages?" Raff went on, in 1988, to publish a paper in the Journal of Economic History where he argues that models of wage determination simply cannot explain the causal forces behind Ford's choice to introduce the $5 dollar day. It was, instead, a reaction to the potentialities associated with massive labor unrest.

The question of cooperation raised in the preceding paragraphs brings us finally to what might be called "morale-based" efficiency wage theories such as the one proposed by Akerlof (1982). Morale explanations in general, and Akerlof's gift exchanges in particular, have received relatively little attention compared to other efficiency wage theories. But it is quite plausible that the higher wages might have raised morale and contributed to the Ford plant's productivity.

The Ford shops were certainly no workers' paradise in 1914. The company proudly claimed that it crowded workers and machines together extraordinarily tightly to take advantage of every available inch of space on the shop floor. It even filled the air with work in progress. There was no particular dignity in work at the plant. Thus there was ample scope for Ford to raise morale. The changing technology also increased the importance to Ford of "buying the peace" and avoiding systematic soldiering and output restriction or other collective action by his work force.

I know I've done the "coming soon" thing a lot recently. A flurry of blog posts is definitely on its way. Three main topics in the works:

-Godel and economics

-Why not efficiency wages?

-Law and the labor process in economic development