Tip of the Hat to Svend Aage Christensen
So what is the explanation for this disjuncture between theory and empirical results? Krugman’s answer is “that workers are not, in fact, commodities.” Unlike soybeans or other commodities, employees know and care about their price, and when they are paid better, they tend to work harder, stay in their jobs longer, and improve the employer’s bottom line. Krugman suggests that viewing workers as commodities leads directly to the aggressive attack on wage and benefits that has been dominant in the U.S. for the last forty years. But as soon as we reject the idea of workers as commodities, the road is open to alternative policies that could address skyrocketing income and wealth inequalities. Read full article.