At the heart of the debates in seventeenth- and eighteenth-century British political economy lay a fundamental question about human nature: What motivates a “free” labor force to provide the industry needed to make a nation great? The “labor problem” that obsessed these early modern writers differed fundamentally from the problems of earlier “slave” and later “trade union” epochs. No longer could Aristotelian rules of proper household management effectively discipline a labor force; notions of collective bargaining and a standard forty-hour week/fifty-week year lay far in the future. Political economists in pre-industrial England faced the problem of how to motivate an independent labor force, freed from serfdom and at least partially from the soil, yet resistant to the continuous employment demanded by the market and undisciplined by the reward system which characterizes a developed economy (Bienefeld 1972; Engerman 1992). Indeed, these early political economists, who were just beginning to explore the “rules” of market supply-and-demand, faced the rather rude evidence that British workers did not obey the rules. Where all “normal” commodities naturally increased in supply in response to an increase in demand and price, labor seemed a most “perverse” commodity, responding to an increase in demand with a decrease in supply.
One may well agree with Jacob Viner (1937, 113-15) that, despite pretensions to positive science, much of pre-classical political economy represented mere “special pleading for limited economic interests.” Every tract had its political agenda directed toward some pressing issue like corn bounties, excise taxes, or interest rates. And although every writer aspired to an objective, rational argument in defense of his particular proposal, theory and description bent readily to political purposes (Coleman 1981, 106). On the issue of the supply of labor, historians of political economy have well captured the essence of seventeenth- and eighteenth-century polemics in dividing thinkers into black (mercantilist/anti-labor/low-wage) and white (liberal/pro-labor/high-wage) camps.
Nevertheless, when one looks beyond the political biases to tease out of the rhetoric psychological insights into the supply of labor, one finds a shared language that has gone relatively unnoticed by modern scholars. As J. G. A. Pocock (1975, 437) found in his own intense examination of contemporaneous political thought, “an intellectual scaffolding can be discovered in [their] thought, a language of assumptions and problems more consistent than [their] behavior and shared to a considerable degree by writers on both sides of the political divide.” This language–what we will call the necessity consensus–while perhaps never achieving the status of economic theory, played a major role in shaping the arguments of British political economists from Thomas Mun to Adam Smith.
1. The Supply of Labor
Many scholars have casually employed terms like backward‑sloping and backward-bending as shorthand characterizations of pre-industrial England’s labor supply (see Furniss [1920] 1957, 233-5; Coleman 1955, 290; Grampp 1965, 1:65; Wiles 1968, 119, 124; Hundert 1969, 67-70; Jones 1970, 74; Bienefeld 1972, 24, 28; Bowley 1973, 179-80; Hollander 1973, 58, 251-2; Rosenberg 1974, 1179; Landreth 1975, 199-201; Blanchard 1978, 4; Mathias 1979, 148; Rule 1981, 52; Spiegel 1983, 130, 149, 251; Kumar 1984, 197; Lis and Soly 1984, 190; Levine 1987, 21, 49; Campbell 1987, 231-2 n. 9; Hutchison 1988, 39; Ekelund and Hébert 1990, 51-2). Such neo-classical concepts can prove quite useful for translating pre-classical political economy if we first establish what exactly we mean by the supply of labor.
The aggregate supply of labor is defined as the product of labor quantity‑-the size of the labor force and amount of time worked‑-and labor quality‑-the “efficiency” of the labor provided. The labor force varies with net changes in population (births, deaths, migration) and the labor force participation rate (affected by custom, age structure, and other factors). The short-run supply of labor is usually measured over the course of a year (to allow evening out of seasonal and other fluctuations), while the long-run supply may comprise several generations of laborers. Labor efficiency, the most complex element and most difficult to measure directly, is a function of physiological and mental labor capacity, human capital (culture, education, experience), the work environment, and exertion while at work (Rae 1910; Robertson 1921; Douglas [1934] 1964, 72-3, 229-314; Rothschild 1954, 36-48; Reynolds 1978, 21-62; Freeman 1979, 16-35; Hammermesh and Rees 1988, 1-100).
One might well question the utility of such an ahistorical concept as labor supply outside a particular sociocultural context. Social historians, sociologists, and anthropologists, following Karl Marx, have emphasized the difficulty of distinguishing between work and leisure in pre-industrial societies (Marx 1973, 611-2; Herskovits 1952, 111; Thomas 1964, 51-7; Thompson 1967, esp. 80; Dumazedier 1974, 9-16; Minge-Klevana 1980, 279-80; Archibald 1989, 182-3, 221-2 n. 5). For their part, neo-classical economists, following the work of Gary S. Becker (1976, 89-114) and Staffan B. Linder (1970), have rejected the dichotomization of work and leisure preferring terms like activities and commodities.
Nevertheless, adopting the common distinction between leisure and work based on the degree to which the activity is perceived as “obligatory or necessary to the maintenance of life” and/or “instrumental to other ends rather than ends in themselves,” the concepts still provide a useful common-sense framework for analyzing human behavior (Lundberg et al. 1934, 2-3, 94; see also Herskovits 1952, 111; Gross 1961; de Grazia 1962; Neulinger 1981, 15-8; Parker 1983, 3-10; Kelly and Godbey 1992, 14-8, 33). “Everyone,” says John Neulinger in The Psychology of Leisure (1981, 15), “knows the difference between doing something because one has to and doing something because one wants to.” In the context of pre-industrial England, as historian Hugh Cunningham (1980, 57) notes, “leisure itself, a harvest celebration for example, may have been inextricably bound up with work, but to pretend that participants were unaware when they were working and when they were not is sheer romanticism.” Certainly pre-classical political economists recognized the degree of freedom and instrumentality inherent in the common distinction between voluntary idleness and work.
Analyses of “the total short-run supply of labor in terms of effort” (or simply, the supply of effort) involve aspects of labor force participation rate, time worked, and exertion while at work. The elasticity of the supply of effort measures the change in supply in response to an incremental change in the real price (or wage) of effort. For present purposes we may simplify potential responses to the four basic types presented in Table I, each with different implications for the combined rate of consumption and net saving as well as work and leisure.
Table 1 Labor Supply Typology
| Wage | rise | Wage | decline | ||
| Elasticity (e) | Effort | C/S | Effort | C/S | |
| Target-income hypothesis (TIH) | e = -1 | – | 0 | + | 0 |
| Backward-sloping | -1 < e < 0 | – | + | + | – |
| Inelastic | e = 0 | 0 | + | 0 | – |
| Forward-sloping | e > 0 | + | + | – | – |
| Note: See text for definition of terms. |
| C/S = consumption/saving |
| + = increase |
| 0 = no change |
| – = decrease |
Economists and economic historians have labeled the backward‑sloping supply as perverse, “the antithesis of standard market theory,” because an increase in the price of labor induces a reduction in the supply of effort and hence tends to generate an unstable equilibrium (see Furniss [1920] 1957, 86; Douglas [1934] 1964, 245, 257; Hutchison 1953, 55-8; Ashton 1955, 205; Boulding 1955, 210, 223-5; Buchanan 1971, 385; Mathias 1979, 148-9; Hutchison 1988, 232, 402 n. 2). Another common label, leisure preference, suggests merely that laborers will take at least part of any increase in real wages in increased leisure (thereby reducing their supply of effort) as well as in increased consumption/savings. The target income hypothesis (TIH) represents an extreme variant of the backward-sloping supply, where an incremental increase or decrease in price causes a proportional decrease or increase in supply such that total earned income and thus consumption/savings remain constant, implying a target income or a fixed material standard of living (Berg 1961; H. Smith 1965; Georgescu-Roegen 1966, 376-7; Ellis 1981; Perrings 1985, 831-3, 848 n. 22). In the inelastic supply, supply of effort remains essentially fixed, insensitive to wage changes, with consumption/savings rising and falling proportionably with real wages. The forward‑sloping supply represents the economists’ normal response in which effort responds like any normal commodity, rising and falling (along with consumption/savings) with the price incentive.
2. Low-wage Theory
Most scholars have regularly interpreted the policy recommendations and economic theories found in the seventeenth- and eighteenth-century literature within various dichotomous schools of thought: mercantilist versus liberal, low- versus high-wage, pro‑ versus anti‑labor. Arthur Young’s famous line has often been quoted as typical of low-wage theorists: “Every one but an idiot knows that the lower classes must be kept poor or they will never be industrious” (Young 1771, 4:361, quoted in Furniss [1920] 1957, 118. Edgar S. Furniss ([1920] 1957, 117-56) cites numerous examples of what he calls the utility of poverty theory, running an unbroken span from the early seventeenth to the early nineteenth century. Key low-wage theorists included, in the seventeenth century, Sir William Petty, Thomas Manley, John Houghton, Sir William Temple, and Francis Gardiner, and, in the eighteenth century, Bernard Mandeville, Joshua Gee, Henry Fielding, Sir James Steuart, William Temple (of Trowbridge), Arthur Young, and Francis Townsend (Brentano 1894, 2-3; Schulze‑Gaevernitz 1895, 2‑4, 7-8; Kennedy 1913, 116-8; Furniss 1920, 117-56; Gregory 1921; Seligman 1927, 46-55; Lipson 1931, 3:276-7; Gilboy 1934, 230-1; Beer 1938, 172-8; Wermel 1939, 3-14; Buck 1942, 88-93; Hutchison 1953, 55-8; Heckscher 1955, 2:155-67; Bowley 1973, 179-80; Landreth 1975, 198-201; Appleby 1978, 146; Mathias 1979, 150-1).
High-wage theorists, on the other hand, regularly noted that low wages did not necessarily mean cheap labor, citing as evidence higher labor productivity and greater prosperity in high-wage regions and countries. Adam Smith (1937, 73, 81), the premier proponent of high wages, believed the “liberal reward of labor” was “the necessary effect and cause” as well as the “natural symptom” of increasing national wealth. Along with Smith, the more important high-wage theorists included in the seventeenth century, Thomas Mun, Sir John Cook, Sir Matthew Hale, John Collins, Sir Josiah Child, Sir Walter Harris, Charles Davenant, and John Cary, and, in the eighteenth century, Daniel Defoe, Jacob Vanderlint, George Berkeley, Francis Hutcheson, Benjamin Franklin, Sir Matthew Decker, Malachy Postlethwayt, Josiah Tucker, David Hume, Nathaniel Forster, Richard Price, and James Anderson (Marx [1976] 1990, 386 n. 89; Roscher 1882, 1: 73-5; Brentano 1894, 3; Schulze-Gaevernitz 1895, 4-7; Furniss [1920] 1957, 125-7, 176n; Gregory 1921, 45-6n; Seligman 1927, 55-62; Lipson 1931, 3:273-4; Viner 1937, 56-7; Wermel 1939, 4-5; Buck 1942, 93-4, 213; Hutchison 1953; Heckscher 1955, 2:168-72; Coats 1958; Spengler 1960, 22-3, 30-1; Grampp 1965, 1:61-2; Wiles 1968; Hundert 1969, 240-97; Bowley 1973, 179; Horne 1978, 69; Appleby 1978, 147-8; McNulty 1980, 32-5).
Such high- and low-wage emphases did indeed color the work of these political economists, but strict dichotomies are too simplistic. For example, almost all seventeenth- and eighteenth-century British political economists presumed the right to employment, the duty to labor, a “subsistence theory of wages” (wages should be at a level just sufficient to maintain one’s “station”), a “free labor” force (in descriptive if not perhaps normative theory), and the goal of maximizing national labor supply and productivity. They presumed that all men were egoistic and pursued their “perceived” particular interests (although not necessarily their “true” interests), a self-interestedness that proper policy could manipulate for the common good (Grampp 1965, 1:68-74.).
More importantly for an analysis of the history of theories of labor supply, modern scholars have misinterpreted these two schools of thought as reflecting fundamentally different assumptions about the nature of the labor supply in early modern Britain: a debate over whether the supply of effort was better explained by the TIH or a forward-sloping supply. A thorough reading of the primary and secondary literature shows this traditional dichotomization to be a gross distortion, with statements of both TIH and positive elasticity few and far between, inaccurate, and unrepresentative.
A handful of political economists did indeed make unequivocal TIH statements, at least with regard to the lowest classes. Sir William Petty first presented the argument in his Treatise on Taxes (1662): “If you allow double [the wages], then he [the laborer] works but half so much as he could have done, and otherwise would” (Petty 1899, 1:87). Similar statements appear both in the works of low-wage theorists like Manley, Houghton, Temple of Trowbridge, Townsend, as well as high-wage theorists like Child and Tucker (Manley 1669, 19; Houghton 1728, 4:388; Child 1693, 19; Tucker [1753] 1966, 339-40; [Temple] [1758] 1966, 500; [Townsend] [1786] 1859, 409-10).
But an inherent contradiction pervades the “mercantilist” literature if one assumes a strict TIH (Mathias 1979, 155-6; Rule 1981, 54-5; Lis and Soly 1984, 190). For the very literature that criticizes the indolence, idleness, and sloth of the laborer, also criticizes his indulgence in luxury, superfluity, riot, excess, debauchery, spreeing, prodigality, extravagance, voluptuousness, and vice (Manley 1669, 19; Houghton 1728, 4:384-5; Petty 1899, 1:274-5; [Gardiner] 1696, 16-7; Fielding 1751, 80, 82, 92; [Temple] [1758] 1966, 500, 515, 519; Steuart 1966, 2:403, 691-2, 696; [Temple] 1770, 15-7, 50-1; [Townsend] [1786] 1859, 410, 442-3). William Temple of Trowbridge, the premier eighteenth-century low-wage theorist, captured this logical inconsistency in graphic detail in two statements from his Vindication of Commerce and the Arts ([1758] 1966, 515, 519). First: “If labourers could purchase the common necessaries of life for half the money they usually do, they would work but half the time they do now.” Second: “If a labourer can procure by his high wages or plenty, all the necessaries of life; and have afterwards a residuum, he would expend the same, either in gin, rum, brandy or strong beer; luxurize on great heaps of fat beef or bacon, and eat perhaps till he spewed; and having gorged and gotten dead drunk, lie down like a pig, and snore till he was fresh. This is the common consequence of high wages and plenty.” This is obviously a case of the laborer having his cake and eating it too.
The target income hypothesis implies that if real wages rise, the wage earner simply works less but does not consume any more than he would have otherwise. On the other hand, spendthrift behavior suggests an inelastic supply of effort, since the individual spends his money as fast as he receives it, which does not allow him to take out any of the increased earnings in increased leisure. Indeed, many statements at this time suggest that although higher wages may have led to increased time and money spent in pubs on Monday and Tuesday, workers made up for the time lost in long work hours on Thursday and Friday (Houghton 1728, 4:384; Lipson 1931, 2:56-7; Ashton 1955, 204-5; Pollard 1965, 182; Thompson 1967, 72-5; Bienefeld 1972, 12; Reid 1976, 79). The tradition in London and elsewhere of paying wages in alehouses on Saturday nights suggests further that employers understood well the link between labor supply and prodigality (George 1951, 296-9; Reid 1976, 79; see also Mandeville 1924, 1:190-1; and Coats 1958, 41-2).
Some low-wage theorists also suggested an inelastic supply when they defined individuals or societies as either industrious or indolent, an either/or human quality not directly linked to incentive (and thus inelastic), reinforced by “habit” or “custom.” An industrious man decreased his supply of effort with as much difficulty as an indolent man increased his (Temple 1814, 1:164-5, 3:2; Manley 1669, 25; Petty 1899, 1:30, 201-2; [Temple] 1770, 30-1, 61-2; [Townsend] 1786, 423, 442). Many complaints about the working class read much more like inelastic indolence than the TIH, such as this classic statement from Bernard Mandeville (1924, 1: 192):
Every Body knows that there is a vast number of Journey‑men Weavers, Tailors, Clothworkers, and twenty other Handicrafts; who, if by four Days Labour in a Week they can maintain themselves, will hardly be persuaded to work the fifth, and that there are Thousands of labouring Men of all sorts, who will, tho’ they can hardly subsist, put themselves to fifty Inconveniences, disoblige their Masters, pinch their Bellies, and run in Debt, to make Holidays.
Most charges of indolence against British laborers rested ultimately on Biblical standards of a six-day, sunrise-to-sunset work week, drawing on the Dutch as a living example of an industrious and frugal people (Fielding [1751] 1988, 80-1; [Temple] [1758] 1966, 501; Steuart 1966, 2:692; [Temple] 1770, 24, 28-9, 38, 40, 49, 55, 61-2).
Thus, scholars have unjustifiably emphasized the handful of explicit TIH statements and simplistically equated low-wage theory with the TIH (see Douglas [1934] 1964, 229, 270-1; Whittaker 1940, 578-80; Chapman 1940, 86-7; Hutchison 1953, 55-8; Coats 1958, 41-3; Grammp 1965, 1:71-2; Georgescu-Roegen 1966, 376-7, 383; Pollard 1965, 190-1; H. Smith 1965, 31n; Sourdain 1966, 603-4; Blanchard 1978, 3-4; Mathias 1979, 155-6, 161-2; Kumar 1984, 197; Lis and Soly 1984, 190; Levine 1987, 21, 49 Most mercantilists, as Edmund Whittaker acknowledges, were simply “content to assert that there was a negative correlation between the wage and labor supply” (Whittaker 1940, 579).
3. Necessity, the Perpetual Mother
The classical aphorism “Necessity is the mother of invention” better captures the sentiments of low-wage theorists than the TIH. Variations on this universal maxim of human nature run throughout British political economy. Besides invention, writers frequently mentioned industry, oeconomy, and frugality as children of necessity or poverty (Temple 1814, 1:164, 180; 3:2; Houghton 1728, 4:56, 382-93; Houghton [1693-1703] 1969, 25 October 1695, 15 November 1695, 29 May 1696, 3 June 1698, 12 May 1699, 23 Apr. 1703; Mandeville 1924, 1:183-9; [Temple] [1758] 1966, 498, 500, 511-2, 542; [Temple] 1770, 9, 15, 26-30; Young [1774], 110-1; [Townsend] [1786] 1859, 403-4, 415-6, 443).[ref]See also Schulze-Gaevernitz 1895, 3-4; Viner 1937, 91n; Johnson [1937] 1965, 250-2; Wermel 1939, 9-12; Grampp 1965, 72-3; Hutchinson 1967, 62; Appleby 1978, 73-98.[/ref] Low-wage theorists loved to quote the grand pensionary of Holland, John de Witt, to the effect that excise taxes “will excite the commonality to ingenuity, diligence, and frugality,” or, as Temple of Trowbridge translated, “High taxes promote invention, industry and frugality” (de Witt [1746] 1972, 92; Houghton [1693-1703] 1969, 23 April 1703; [Temple] 1770, 9-11, 49-50). Necessity in the form of falling real earned income spurred an individual to undertake some activity requiring increased mental or physical effort or frugality that otherwise the individual would not have undertaken, although low-wage theorists regularly also granted some role to hope and opportunity in spurring the activity (Petty 1899, 1:201; Houghton [1693-1703] 1969, 15 March 1699/1700; Steuart 1966, 1:310; [Townsend] [1786] 1859, 403). This necessity framework well depicts a general backward-sloping supply of effort rather than the TIH or an inelastic supply, since the spur to industry in response to lower real wages suggests an elasticity less than zero while the spur to frugality suggests an elasticity greater than negative one.
This necessity consensus was reinforced by compatible Calvinist and classical republican views, best summarized by Francis Bacon in his essay “Of Adversity”: “Prosperity doth best discover vice, but adversity doth best discover virtue” (Benham 1926, 9b). Puritans believed that poverty and adversity fostered Christian virtues more effectively than wealth and prosperity which would only lead to the proliferation of the cardinal sins, including luxury, avarice, and indolence (Troeltsch 1931, 2:641; Schlatter 1940, 146-57). Furthermore, following Machiavelli, text after text advocated a “Spartan model” to avoid the corruption of rich, luxurious nations (Eversley 1959, 23-35; Rawson 1969; Thomas 1965, 218; Pocock 1975, 430-1, 443-5, 491-2; Sekora 1977; Gunn 1983, 99-101; Jack 1989, 3-4, 20). As in the classical era, so forcefully were such statements made that it gave rise to the accusation of making a virtue of necessity and thus confusing moral with natural law (Cooke 1648, 71; Benham 1926, 77a, 78a, 312a, 806b, 861a; Evans 1968, 480).
The Renaissance had brought the revival of classical environmentalist ideas in the work of Botero, Bodin, Machiavelli, and Montaigne, echoing Plato on the softening effects of an abundant environment (Whittaker 1940, 60; Dean 1942; Spengler 1960, 323; Hodgen 1964, 275-88, 485-6; Glacken 1967, 370-1, 432-3, 449-56, 543-8, 572-6, 587, 596-8, 602-3, 608, 617-8, 645; Voget 1975, 79-80). Low-wage theorists extended the observation that great rewards led to luxury and sloth to a general principle applicable to nations as well as individuals, and confirmed by experience in rich and naturally fertile areas like Africa, America, Ireland, and Spain (Petty 1899, 1:34; Temple 1814, 1:165; Houghton [1693-1703] 1969, 21 February 1695/6, 3 June 1698; Mandeville 1924, 1:182-4; [Temple] [1758] 1966, 501-2; [Temple] 1770, 7-9). Seventeenth- and eighteenth-century political economists stressed the beneficial effects of increasing population pressure on limited resources stimulating greater industry, economic development, and in general the progress of civilization (Carey 1928, 47-8; Hutchinson 1967, 54-5, 62-3, 68, 76-7, 82, 84, 89, 99-103, 109; Meek 1976, 88, 93, 101, 104, 117-9, 125, 133-4, 157-8, 194-6; McCoy 1980, 20-1). Indeed, the seventeenth-and early eighteenth-century British obsession with emulating the Dutch‑-what Furniss calls the Dutch fetish‑-highlighted the key roles of both heavy taxation and a large population concentrated on a limited land area in stimulating Dutch commercial success (Manley 1669, 25; Petty 1899, 1:lxxii, 59, 255-71; Temple 1814, 1:133-51, 164-80; Houghton [1693-1703] 1969, 25 October 1695, 1 November 1695, 15 November 1695, 20 December 1695; Mandeville 1924, 1:183-9).[ref]See also Schulze-Gaevernitz 1895, 7; Furniss [1920] 1957, 23, 58 n. 3, 101-4; Seligman 1927, 50; Wermel 1939, 3-4.[/ref]
Despite the universal psychological implications of the necessity concept, low-wage theorists showed a distinct class bias in generally hesitating to extend the concept to the British middle and upper classes. Indeed, Collins (1680, 11) chastised the low-wage theorists who would apply necessity to others but not to themselves, a carrot for the rich and a stick for poor. For the middle and upper classes, mercantilist literature regularly presumed an inelastic labor supply, either industrious or justifiably indolent. When their present course of action became unprofitable, industrious classes like merchants and farmers simply abandoned it for some other (usually unspecified) equally profitable line of employment (Houghton 1693-1703, 4 March 1697/8; [Gee] [1729] 1972, 15 [conclusion]; [Temple] [1758] 1966, 546; Young [1774] 1967, 27-31). Low-wage theorists frankly acknowledged the indolence of the landed gentry and aristocracy, justified on the grounds of their wealth and position (Petty 1899, 1:270, 307-8; Mandeville 1924, 1:239; Fielding [1751] 1988, 80-4; [Townsend] [1789] 1859, 404, 415).
Nevertheless, one low-wage theorist, John Houghton, the man who undoubtedly did more than anyone to popularize the idea of necessity in his long-running, late seventeenth-century newsletter, at one time or another extended the concept to all classes indiscriminately. In his view, the gentry, farmers, merchants, tradesmen, manufacturers, and laborers all ceased working when “they have enough.” The major difference between the classes depended on the length of their time-perspective, varying from the weekly wage of a wage laborer to the lifetime retirement fund of a gentleman. The effect of distress caused by civil wars, prodigality, and indebtedness promoted a late seventeenth-century agricultural revolution as “necessity” pressured the normally indolent gentry to rack their tenants and engage “upon new projects and industry.” Furthermore, although most low-wage theorists considered that farmers simply abandoned agriculture in response to low prices and high rents, Houghton (1728, 4:56, 85, 383) believed that these rack rents caused tenant farmers to accept “projects and industry they never could be induced to” before, a point later echoed by Young.[ref]For more about Young, see Furniss [1920] 1957, 134n; and Lipson 1931, 2:376.[/ref]
4. High-wage Theory
If modern scholars injudiciously equate low-wage theory with the TIH, they also define high-wage theory incorrectly in terms of a forward-sloping supply of effort (see Schulze-Gaevernitz 1895, 4-7; Coats 1958, 35-51; Wiles 1968, 119, 124; and McKendrick 1982, 19.). First, high-wage theorists tended to sidestep the issue of the supply of effort, focusing instead on the positive benefits of high wages on both aggregate labor supply‑-via increases in nuptiality, fertility, immigration, and reduced emigration‑-and reductions in begging, stealing, and resorting to parish relief.[ref]Regarding emigration see Collins 1680, 11; Child 1693, 12 (preface); Vanderlint [1734] 1914, 33; Decker [1751] 1973, 16, 70; Postlethwayt 1757, 1:13-4, 2:377; Franklin 1882, 2:258, 312, 444; Anderson [1777] 1968, 293. On fertility and nuptiality, see Child 1693, 29-30; Vanderlint 1734, 28, 71; Postlethwayt 1757, 1:19-20; Franklin 1882, 2:311-21, 436; Forster 1767, 46; A. Smith 1937, 70-3, 78-9, 146. Regarding resorting to poor relief see Vanderlint [1734] 1914, 33; [Defoe] [1704] 1859; Decker [1751] 1973, 58-9; and Franklin 1882, 2:358, 367-8. Regarding begging and stealing see Collins 1680, 10; Hale 1683, 15-16; [Defoe] [1697] 1969, 32; Franklin 1882, 2:367, 436, 476; Decker [1751] 1973, 16-7; and A. Smith 1937, 73[/ref] Furthermore, while low-wage theorists believed that higher wages led to debauchery and thus reduced labor efficiency (further reducing labor supply beyond reductions in effort), high-wage theorists stressed that higher wages led to improved nutrition and thus higher labor efficiency.
Second, many high-wage theorists, like their low-wage counterparts, divided society into the indolent and the industrious, suggesting an inelastic supply of effort. Robert Nugent well captured this high-wage position when he noted that taxes “may starve the industrious, but they never will induce the idle and extravagant to labour and to save” ([Nugent] 1749, 17, quoted in Seligman 1927, 58). Although many high-wage theorists also criticized the idleness, luxury, and debauchery of workers‑-and workhouse schemes to enforce a duty to labor and develop an early habit of industry proved as popular with high- as low-wage theorists‑-liberals typically blamed these vices on the poor laws, a general lack of employment, government policy (such as taxation and tariff), and concomitant hopelessness, rather than the high wages stressed by conservatives ([Davenant] 1695, 87-8, 143, 148; [Defoe] [1704] 1859, 55-7; [Defoe] [1728] 1928, 24-5; Decker [1751] 1973, 58, 66; Tucker [1753] 1966, 339, 351-2n; Tucker 1931, 245; Franklin 1882, 2:359, 368, 371, 402; Postlethwayt 1757, 1:43; Forster 1767, 58-60).[ref]See also Schulze-Gaevernitz 1895, 5-6; Furniss 1920, 80-116; Marshall [1926] 1969, 24-6, 37, 43-56; Johnson [1937] 1965, 281-9; Buck 1942, 213-4; Hutchison 1953, 60-1, 68.[/ref]
Third, the most important high-wage theorists throughout the seventeenth and eighteenth centuries actually argued in favor of a backward-sloping supply of effort, a paradox noted by scholars since 1751 when Fielding ([1751] 1988, 115-18) chided Child for his seeming inconsistency. More recent historians of economic thought have expressed similar confusion over Davenant, Defoe, Franklin, Hume, Postletwhayt, and Tucker (see Roscher 1882, 2:73-4n; Seligman 1927, 50-2, 55-6; Gilboy 1934, 231; Viner 1937, 91n; Johnson [1937] 1965, 252; Hutchison 1953, 56; Rotwein 1955, xc; Coats 1958, 36-46, 51; Wiles 1968, 119, 124-6). Other statements suggestive of a backward-sloping supply of effort appear in the work of Harris, Vanderlint, Berkeley, Hutcheson, Price, Forster, and Anderson (Harris 1691, 53-4; Vanderlint [1734] 1914, 29; Forster 1767, 56-62; Price 1803, 2:147-8; Anderson [1777] 1968, 277, 293).[ref]See also Roscher 1882, 2:73-4n; Furniss [1920] 1957, 136, 173, 176n; Seligman 1927, 55-62; Johnson [1937] 1965, 287; Hutchison 1953, 55-7; Hutchison 1988, 59, 232, 245-6.[/ref]
Fourth, high-wage theorists further implied a backward-sloping supply in their emphasis on the natural “trickle-down” to the lower classes of the upper-class indulgence in both luxury and idleness ([Barbon] [1690] 1903, 14, 21; [Davenant] 1695, 87-8; Forster 1767, 62-3; Franklin 1882, 2:428). If rising real wages promote increased emulation, as both low- and high-wage theorists believed, this would, ceteris paribus, lead to a backward-sloping supply of effort, since at least part of any increase in real wages would be taken out in the form of increased leisure.
Fifth, the idea of necessity and the concomitant Dutch model appear as ubiquitously in the work of high-wage theorists as in that of their low-wage counterparts (Mun [1664] 1970, 181-5, 191-5; Collins 1680, 10; Child 1693, 23-4, 42-3; [Davenant] 1695, 144-5; [Defoe] [1728] 1928, 25; Hume 1955, 17-18, 84-5; Tucker 1931, 63-4, 255; Postlethwayt 1757, 2:366-7; Forster 1767, 10-2, 23-4, 56-8, 168-9; Franklin 1882, 2:373-4; Anderson [1777] 1968, 277, 293). Liberals like Hume, Forster, Tucker, and Anderson believed a combination of moderate luxury and moderate necessity the best formula for stimulating a habit of industry (Hume 1955, 85; Forster 1767, 37-9; Tucker 1931, 245; Anderson [1777] 1968, 419-20).
Sixth, in contrast to the innumerable claims of negative elasticity, I can find no unambiguous claim in the seventeenth- and eighteenth-century British literature for positive elasticity. A. W. Coats cites, as examples of a forward-sloping supply, statements by Vanderlint, Berkeley, Postlethwayt, Forster as well as those in less prominent late eighteenth-century tracts by Thomas Mortimer, Francis Moore, and the anonymous tract Considerations on the Policy, Commerce, and Circumstances of the Kingdom, while Richard C. Wiles cites the work of Lawrence Braddon (Coats 1958, 36-43; Wiles 1968, 124). But none of these provide clear statements of positive elasticity. Vanderlint and Postlethwayt (who simply plagiarized Vanderlint) report as evidence a case of the positive response of tailors to extraordinary wages during “a general Mourning for the Death of a Prince,” behavior as compatible with a backward- as a forward-sloping short-run supply of effort (Vanderlint [1734] 1914, 119; Postlethwayt 1757, 1:43-4; see also Furniss [1920] 1957, 127; Robertson 1921; Knight [1921] 1965, 117n; and Finegan 1962). Indeed, Vanderlint probably drew this “general mourning” example from Houghton (1728, 4:387), who complained that despite the increase in trade, journeymen still proved most industrious in dear times. Most statements cited by Coats and Wiles in support of positive elasticity are better interpreted within an indolence/industry or a necessity/hope/opportunity framework.
Finally, if low-wage theorists were biased against the lower classes, high-wage theorists were just as biased against the middle and upper classes, a point almost totally ignored in the secondary literature. In direct opposition to conservatives, liberals sought the carrot for the industrious working classes and the stick for the indolent middle and upper classes. For example, they consistently argued that lowering the rate of interest would promote industry and thriftiness by forcing those who had been able to live upon unearned income to work and reduce consumption (Child 1693, 23-4; Vanderlint [1734] 1914, 32; Decker [1751] 1973, 65-6; Postlethwayt 1757, 1: 13; Franklin 1882, 2:255-6). Daniel Defoe ([1697] 1969, 1, 6) attributed the rise of “The Projecting Age” in late seventeenth-century England to losses inflicted on merchants and their insurers by the war with France. “Prompted by Necessity,” observed Defoe, merchants “rack their Wits for New Contrivances, New Inventions, New Trades, Stocks, Projects, and any thing to retrieve the desperate Credit of their Fortunes.” [Henry Martyn] ([1701] 1970, 590-1; see also Tucker 1931, 244; Postlethwayt 1757, 2:387, 408, 415) believed the stickiness of wages and the pressure of lower prices from foreign competition forced employers caught in a cost-price squeeze to search for and adopt innovations in technology and organization to improve production efficiency.
5. The Adam Smith Problem
What about the ultimate high-wage theorist, Adam Smith? Truly, Adam Smith reveals the complexity of argument brought to bear on the subject, but he ultimately proves a quite typical high-wage theorist. Most scholars consider Smith a staunch advocate of a forward-sloping supply of effort, regularly quoting from the Wealth of Nations (see Rottenberg 1952, 95; Sourdain 1966, 603-4; Rosenberg 1974; Landreth 1975, 200-1; McKendrick 1982, 183; Nyland 1986, 516-7; Mokyr 1991, 186; Engerman 1992, 7):
The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. (A. Smith 1937, 81)
Some have contrasted this suggestion of positive elasticity with Smith’s earlier support for a backward-sloping supply of effort (see A. Smith 1937, 81 n. 43; Cannan 1937, 81n43; O’Connor 1961, 273‑5; Bowley 1973, 180, 184, 186, 197-8; Hollander 1973, 163). This is suggested by the observation in his Lectures on Justice ([1896] 1964, 257) that with tradesmen in the commercial parts of England “their work through half this week is sufficient to maintain them, and through want of education they have no amusement for the other, but riot and debauchery.”
Neither the positive elasticity nor the volte-face interpretation does justice to Smith’s argument, however. For the most part, Smith’s approach readily falls into an industry-versus-indolence framework, a framework Smith originally developed in The Theory of Moral Sentiments (1976b, 179-93; see also Dickey 1986). For Smith, industrious man in “continual motion” seeks to maximize his “industry”, “income”, and “wealth” due to “mutual emulation and the desire of greater gain” and “the uniform, constant, and uninterrupted effort of everyman to better his condition” (1937, 81-4, 326). “Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command” (1937, 421). Indolent man, on the other hand, reflects “the interest of every man to live as much at his ease as he can” (1937, 718). “It is better, says the proverb, to play for nothing, than to work for nothing” (1937, 319). As Nathan Rosenberg (1960, 557; see also Hollander 1973, 169; and Rosenberg 1974, 1187) summarizes, “Smith attached great importance to the belief that the generality of mankind is intractably slothful and prone to indolence.”
Although Smith often treated industry and indolence as habits formed early in life and changed only with great resistance, he also believed that indolent man might readily and rapidly transform into industrious man with institutional changes (A. Smith 1937, 8-9, 15, 122, 437; see also Bowley 1973, 193-5; and Rosenberg 1974, 1185-7). Conditions promoting industry include a reward commensurate with one’s effort (as in self-employment or piecework), no restrictions on labor mobility, security in one’s reward, the division of labor, employment in “productive labour,” and a reward equal to the “natural price” of one’s labor. All of these changes foster “the hope of bettering one’s condition” and thus an increase in the per capita level of industry with no change in real wages. Reverse changes cause industrious man to revert to indolent man (A. Smith 1978, 568-9; 1937, 7, 15, 33, 81-4, 122, 268, 278-9, 314-5, 319-21).
But Smith seemed, in Wealth of Nations, to suggest that industry also changes proportionably with real wages. To understand this seeming inconsistency, we need to see exactly what Smith meant by industry. Smith clearly distinguished four basic elements in industry: effort (loss of ease, liberty, and happiness), physiological labor capacity (health, strength, spirits), mental labor capacity (ingenuity, dexterity, spirits), and human capital (training, education, skill). Smith (1937, 766; see also A. Smith [1896] 1964, 175-6; and Hollander 1973, 114) followed closely the high-wage argument that both labor capacities and human capital rise with real wages, while effort moves in the opposite direction:
The proper performance of every service seems to require that its pay or recompence should be, as exactly as possible, proportioned to the nature of the service. If any service is very much under‑paid, it is very apt to suffer by the meanness and incapacity of the greater part of those who are employed in it. If it is very much over‑paid, it is apt to suffer, perhaps, still more by their negligence and idleness.
Smith tended to equate industrious man constrained by labor capacity with the lower classes and indolent man constrained by necessity with the upper classes. Rosenberg (1960, 561, 569; 1864, 1189) believes that Smith (1937, 96-98, 565-66, 578) implied a backward-sloping supply of effort for capitalists in his opposition to high interest and profits and his emphasis on the pressure of competition. Indeed, Smith (1937, 717) noted as clear a statement of the TIH as any low-wage theorist:
In every profession, the exertion of the greater part of those who exercise it, is always in proportion to the necessity they are under of making that exertion. This necessity is greatest with those to whom the emoluments of their profession are the only source from which they expect their fortune, or even their ordinary revenue and subsistence. In order to acquire this fortune, or even to get this subsistence, they must, in the course of a year, execute a certain quantity of work of a known value.
But although Smith did not normally apply this necessity framework to the lower classes, he did not exclude them. For lower and upper classes alike, reward incommensurate with effort breeds indolence, whether in slaves, servants, apprentices, soldiers, great landlords, public servants, or Oxford dons (A. Smith 1937, 83-4, 122, 249, 365, 437, 678, 718). Even for industrious man, he noted, “great labour, either of mind or body, continued for several days together, is in most men naturally followed by a great desire of relaxation, which, if not restrained by force or by some strong necessity, is almost irresistible” (Smith 1937, 82 [emphasis added]; compare Smith 1978, 345-46, 568). Smith (1937, 72) suggested as much in his contrast of the industry of poverty-stricken Chinese artificers with the indolence of relatively wealthy European tradesmen.
Any difference between Smith and other necessity theorists thus reduces to a matter of semantics: whether necessity spurs industry or necessity reduces relaxation. In essence, Smith’s basic approach to the analysis of labor supply did not differ substantially from low-wage theorists like Petty and Temple in the seventeenth century, his eighteenth-century high-wage compatriots like Hume, Forster, and Anderson, or his nineteenth-century followers like Thomas Robert Malthus, John R. McCulloch, Nassau William Senior, and Wilhelm Roscher. All stressed necessity as well as habit, custom, hope, and labor capacity to one degree or another (Temple 1814, 1:141-4, 164; Anderson [1777] 1968, 419-25; Malthus 1986, 1:31, 2:1, 3:47, 454, 471, 6:25-7, 257-8, 268, 320-1; McCulloch 1849, 76-9, 116-8, 198-201, 238-41; Senior 1827, 12, quoted in Coats 1968, 115; Roscher 1882, 2:50-1, 80, 197-8).
This industry-versus-indolence framework helps explain the seeming inconsistencies in the evidence for the positive elasticity and volte-face interpretations above. Firstly, the quotation opening this section simply conveys Smith’s image of industrious man increasing physiological labor capacity (“bodily strength”) with a rise in real wages (“plentiful subsistence”) within a proper institutional environment (“the comfortable hope of bettering his condition”) which causes him to maximize his effort (“exert that strength to the utmost”). While capacity might improve “in proportion to the encouragement it receives,” Smith suggested no degree of elasticity in effort, simply maximization.[ref]Smith (1937, 82-3) further suggests the “labor capacity” interpretation by his emphasis on nutrition, spirits, and health in assessing the impact of dear corn. See also Schulze-Gaevernitz 1895, 8-9; and Whittaker 1940, 580-1.[/ref] Secondly, whereas Smith, in his Lectures on Justice, attributed the rampant idleness in the working classes to the indolence rising out of a lack of proper education, in the Wealth of Nations he changed his mind, finding idleness restricted to a minority and reflecting rather the relaxation naturally concomitant with maximization of effort. This turnabout does not entail any change in Smith’s behavioral framework, but does imply a change in habit, institutional environment, level of necessity, or simply Smithian polemics.
Smith’s exclusive focus on the long-run labor supply and his treatment of all factors of production as inelastic in the short run, suggest that he considered the supply of effort both of little consequence and fairly inelastic (Thweatt 1957, 227-30; Rosenbluth 1969, 308-14; Hollander 1973, 120-1; Lowe 1977, 165-79; Larsen 1977, 224.). This explains how when Smith (1937, 59, 116; see also Hollander 1973, 118-22; and Larsen 1977, 230-2) analyzed Vanderlint’s and Postlethwayt’s case of a “general mourning,” he could make no mention of their main point that extraordinary wages lead to an increase in effort. Further, Smith (1937, 326, 640-1) believed that only an increase in the numbers of “productive labourers” or a change in technology could increase agricultural productivity. But whether inelastic or backward-sloping, the supply of effort plays little role in the Smithian framework, thus tending to confirm the conclusion of R. H. Campbell and A. S. Skinner (A. Smith 1976a, 1:59) that Smith was inconsistent but “the inconsistency was often consistent, because it rarely damaged the central analysis.”
6. Conclusion
Adam Smith’s inconsistency colored the entire debate on the labor problem over the course of the seventeenth and eighteenth centuries, constantly bouncing between support for an inelastic and a backward-sloping short-run supply of effort. But in the final analysis a necessity consensus underlay and guided pre-classical British political economy. In the polemics over the advisability of changes in real wages (whether occasioned by a proposed change in excise taxes, corn prices, statutory wages, or by inflation), high-wage theorists, stressing that the wages of workers were already at subsistence levels, argued that reduced income would lead not to increased industry but only to malnutrition and physical deterioration. Low-wage theorists did not deny that absolute poverty would lead to a reduction in effort, but simply claimed that the present wages of workers were far above subsistence levels. That high-wage theorists went to the empirically and theoretically tenuous position of specifying wages at some absolute minimum suggests that they, as well as low-wage theorists, accepted that at any wage above such a minimum the low-wage argument would hold. Furthermore, although political economists argued over the particular responses that different classes might make to necessity, they all recognized the overwhelming power of necessity for classes far above levels of subsistence.
That modern scholars have neglected this convergence on the idea of necessity need not come as a surprise. For mercantilists and liberals alike, politics was more important than the development of a consistent behavioral approach to political economy. Furthermore, the idea of necessity never attracted a systematizer and played little role in the theory-building of Richard Cantillon, James Steuart, and Adam Smith, to which modern economics traces its roots. Finally, any necessity theory faced as much trouble in the seventeenth century as a similar theory would today. Even if political economists recognized that sticks might be better policy, political common sense usually dictated carrots. Houghton well captured the problem when commenting on the difficulty of applying the Dutch model to England: “I will not wish such Necessity upon our selves in order to the like Improvements; but if for our Sins, through War, or any other Calamity, we shou’d be reduc’d…we may then say like David, ‘Twill be good for us that we have been afflicted.'” (Houghton [1693-1703] 1969, 15 November 1695).
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