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A fundamental externality in the labour market? Ragnar Frisch on the socially optimal amount of work

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  • Agnar Sandmo

Abstract

In the late 1940s, Ragnar Frisch published two articles in Norwegian that constitute a pioneering attempt to apply welfare economics to a problem of economic policy. The main contention of the articles is that there exists a fundamental externality in the labour market because the marginal productivity of labour depends both on input in the individual unit and on total labour use in the economy. While inspired by the problems of post-war reconstruction, Frisch came to regard it as a general problem in a decentralized economy, and he explores its consequences for wage and tax policy. While Frisch attached great importance to the analysis, it has received little attention in the subsequent literature.

Suggested Citation

  • Agnar Sandmo, 2019. "A fundamental externality in the labour market? Ragnar Frisch on the socially optimal amount of work," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 26(1), pages 129-156, January.
    • Handle: RePEc:taf:eujhet:v:26:y:2019:i:1:p:129-156
    DOI: 10.1080/09672567.2018.1555608
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    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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