The Influence of Productivity on Economic Welfare

Also published in: ‘Jan Tinbergen Selected Papers’, edited by L.H. Klaassen, L.M. Koyck and H.J. Witteveen, North-Holland Publishing Company, Amsterdam, 1959, pp. 222-242. Also: Reprint No. 17, Centraal Planbureau, The Hague, 1952.

It is a well-known old thesis that an increase in labour productivity leads to an increase in economic " welfare." Assuming for a while that the meaning of these two concepts is clear, we may say that the statement is correct for a Robinson Crusoe economy as we know it from our books. If Crusoe can get more products for the same effort, then probably he will shorten somewhat his working-day and get more products, and by doing so feel happier. The statement seems guaranteed for an economy : (i)without foreign trade, (ii) without working-hours regulations, (iii) without problems of capital scarcity and (iv) without monetary complications.