Book 2, Chapter 3

This chapter (“Production, consumption, labour, necessaries”) begins aggressively with “Man cannot create material things… he really only produces utilities” [p 53]. Marshall uses this device to point out that the value added by a carpenter (converting wood into a table) is similar to that provided by a furniture dealer: “the furniture-dealer moves and rearranges matter so as to make it more serviceable than it was before, and the carpenter does nothing more.”

§2. Marshall defines “labour” as the effort required to increase the value goods. He explicitly excludes a worker’s pleasure from this definition, a nuance (?) that later economists lost in their definition of labor as a bad and leisure as a good, both of which compete for one’s limited time. Marshall’s definition (borrowed from Jevons) allows one to do work (“labor”) and enjoy it (“pleasure”), although Marshall suggests that he would prefer to allow for pleasure in his definition of labor, i.e., that which adds utility.

Marshall then argues against a popular definition of “productive” as action that creates something of future utility — a definition that excludes enjoying one’s work as well as immediate consumption. I prefer his argument (why are domestic servants “unproductive” but not whisky distillers? Because their products are consumed years later?), especially when one allows for anticipated future consumption (you being able to read this post) as a meaningful result of current labor productivity. When he further elaborates how Merchantilists and Physiocrats only consider precious metals and the output of farmers, respectively, as “wealth,” I just shake my head at the decades that these early thinkers were splitting hairs. As Marshall observes:

The attempt to draw a hard and fast line of distinction where there is no real discontinuity in nature has often done more mischief, but has perhaps never led to more quaint results, than in the rigid definitions which have been sometimes given of this term Productive.

§3. Turning to “necessaries,” Marshall calls attention to the thin (or missing) lines separating “necessaries, comforts and luxuries.” In arguing that necessaries are what “support” working man and his family, Marshall adds the caveat that support might vary with place and culture. As an example, he explains laborers in Southern England are less efficient (and thus poorer)  than laborers in the North (where Manchester and Birmingham were booming), with the result that “the strongest labourers in the South have constantly migrated to the North; and that the energies of those in the North have been raised by their larger share of economic freedom and of the hope of rising to a higher position” [p 57]. This observation not only highlights how London’s status has overtaken the once-industrial North (now called the Midlands), but also how labor also migrated back then.

Marshall then adds that a worker’s income comes in a first part that keeps the worker alive and a second part that contributes to their efficiency. The third step of income (or “consumption”) buys comforts and luxury that “can be minimized without loss of productive efficiency.” These nuances  reflect the norms of the time but also matter today. Back in 1920 (or 1890, when the book was first published), there was probably a debate on how much the Industrial Revolution depended on workers as a raw input (and complement to capital) versus workers as productive assets. Today countries face tradeoffs between protecting workers (and citizens) from Covid19 and pushing them to work (and consume) as a means of keeping the economic bicycle rolling forward. In the US, the situation is stark: Stay home, self-quarantine and/or see the doctor versus hide symptoms and work, because you need the wages to survive and don’t have health insurance.

Marshall then describes necessaries for productive labor (p58):

They may be said to consist of a well-drained dwelling with several rooms, warm clothing, with some changes of underclothing, pure water, a plentiful supply of cereal food, with a moderate allowance of meat and milk, and a little tea, etc., some education and some recreation, and lastly, sufficient freedom for his wife from other work to enable her to perform properly her maternal and her household duties. If in any district unskilled labour is deprived of any of these things, its efficiency will suffer in the same way as that of a horse that is not properly tended, or a steam-engine that has an inadequate supply of coals. All consumption up to this limit is strictly productive consumption: any stinting of this consumption is not economical, but wasteful.

Tend your horses!

Marshal ends the chapter with a note on class differences [p59]:

…the strict necessaries for an average agricultural family are covered by fifteen or eighteen shillings a week, the conventional necessaries by about five shillings more. For the unskilled labourer in the town a few shillings must be added to the strict necessaries… For a man whose brain has to undergo great continuous strain the strict necessaries are perhaps two hundred or two hundred and fifty pounds a year if he is a bachelor: but more than twice as much if he has an expensive family to educate.

GDP 500 per year is about 200 shillings per week, or 8 times what an agricultural family would require for its necessaries. I wonder if that gap holds between white collar and agricultural families these days in richer countries? I think it’s narrowed.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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