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Changing Methods for the Allocation of Scarce Resources to Competing Ends: A Possible Explanation for the Wages Squeeze and Responses to It
Author(s) -
Fforde Adam
Publication year - 2018
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12226
Subject(s) - economics , consumption (sociology) , production (economics) , welfare , work (physics) , joint (building) , scarcity , production theory , neoclassical economics , market economy , microeconomics , engineering , social science , sociology , mechanical engineering , architectural engineering
The paper discusses the economic analysis of modern rich economies. It argues that standard economic theory acknowledges that it does not apply if there is own‐consumption and/or joint production and suggests that successful economic reforms of the 1980s have used markets to drive down costs in sectors where standard economic theory applies. This process has resulted in a situation where rich country economies are increasingly oriented to sectors – predominantly services – where markets work less well, namely those with extensive own‐consumption and joint production, where theory says that factor rewards and other prices cannot be determined by production and consumption conditions. Arguing that this can explain the “wages squeeze,” the paper concludes that other economic mechanisms should and have arisen to secure better welfare gains, thus explaining the recent shift in policy priorities of the ACTU .