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The Political Economy of Work

How has the notion of work quality been treated in the economic literature since the mercantilists? David Spencer reminds us that the quality of work has been an absent issue for three centuries, at least for most of the consecutive dominant approaches in our discipline. When the issue was considered, it often appeared as the mere projection of the social prejudices of the dominant classes. Spencer’s book is much more than a history of how economists have thought about work quality, although that would be a worthy project in itself. The book is designed to shed light on the latest economic research relating to labour, including efficiency wage theory, personnel economics and, in the final chapter, the ‘economics of happiness’. Spencer uses the history of ideas not only to examine critically how mainstream economists have been led to analyse work as they do today, but also to provide the basis for an alternative analysis built upon a longstanding intellectual tradition in the social sciences. The aim of the book is indeed both critical of the mainstream and constructive of a heterodox view. For a decade, Bruno Frey, Carol Graham, Richard Layard and others studying the economics of happiness, have claimed, in opposition to a tenet of mainstream economic theory, that utility ought to be treated as scientifically measurable. Thanks to new techniques developed within psychology, such as the use of surveys of reported well-being, factors other than income can now be taken into account to analyse individual well-being. For example, subjective measures of job satisfaction can be used to measure the utility that workers experience from work itself. As noted by Spencer (p. 128), ‘in the case of the economics of happiness, there is now increasing recognition that interpersonal comparisons of preferences are possible and indeed necessary in the evaluation of individual well-being.’ But the economics-of-happiness approach to job quality, he contends, does not fundamentally challenge the basis of mainstream economics. The weaknesses of the other mainstream theories of work apply also to the new economics of happiness. Spencer does a good job of cataloguing those weaknesses. Contrary to what the compensating wage differentials literature pretends, there is little evidence that workers can substitute higher income for less enjoyable work; on the contrary, lower wages are generally associated with unpleasant work. In principalagent theories, such as transaction costs economics, efficiency wage models and Review of Political Economy, Volume 22, Number 4, 617–622, October 2010