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Thorstein Veblen on the nature of the firm and income distribution

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  • Guglielmo Forges Davanzati

    () (University of Salento (IT))

Abstract

The aim of this paper is to provide a theoretical model inspired by Veblen’s theory of the firm, and to derive some implications of firms’ behaviour for the process of income distribution. It will be shown that the firm is a locus of conflict, involving technicians – interested in expanding production – and “businessmen” – interested in gaining money profits via the management of the “pecuniary side” of the firm. The outcome of the bargaining within the firm defines the ‘workmanship-type’ or ‘non-workmanship-type’ nature of the firm, and affects the level of real wages and employment, insofar as the greater the power of technicians, the higher the real wages are. Moreover, since the expansion of production is associated with the minimum degree of underutilization of capital, technical improvements have a positive effect on the level of employment. Finally, it is argued that a wage increase can have a positive effect on the degree of capital utilization and the level of employment, via the increase in total demand and in the degree of capital utilization.

Suggested Citation

  • Guglielmo Forges Davanzati, 2016. "Thorstein Veblen on the nature of the firm and income distribution," Working Papers PKWP1618, Post Keynesian Economics Study Group (PKSG).
  • Handle: RePEc:pke:wpaper:pkwp1618
    as

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    File URL: http://www.postkeynesian.net/downloads/working-papers/PKWP1618.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
    1. Asso, Pier Francesco & Fiorito, Luca, 2004. "Human Nature and Economic Institutions: Instinct Psychology, Behaviorism, and the Development of American Institutionalism," Journal of the History of Economic Thought, Cambridge University Press, pages 445-477.
    2. Veblen, Thorstein, 1892. "Böhm-Bawerk's Definition of Capital and the Source of Wages," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 6.
    3. M. E. L. Guidi & D. Parisi (Eds.), 2005. "The Changing Firm. Contributions from the History of Economic Thought (M . PIVA)," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 113(3), pages 487-491.
    4. Veblen, Thorstein, 1904. "Theory of Business Enterprise," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1904.
    5. Malcolm Rutherford, 1984. "Thorstein Veblen and the Processes of Institutional Change," History of Political Economy, Duke University Press, vol. 16(3), pages 331-348, Fall.
    6. Christian Cordes, 2004. "Veblen's "Instinct of Workmanship," its Cognitive Foundations, and Some Implications for Economic Theory," Papers on Economics and Evolution 2004-01, Philipps University Marburg, Department of Geography.
    7. Thorstein Veblen, 1905. "Credit and Prices," Journal of Political Economy, University of Chicago Press, vol. 13, pages 460-460.
    8. Thorstein Veblen, 1908. "On the Nature of Capital: Investment, Intangible Assets, and the Pecuniary Magnate," The Quarterly Journal of Economics, Oxford University Press, vol. 23(1), pages 104-136.
    9. Malcolm Rutherford, 1980. "Veblen on Owners, Managers, and the Control of Industry," History of Political Economy, Duke University Press, vol. 12(3), pages 434-440, Fall.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Veblen; theory of firm; wages; income distribution;

    JEL classification:

    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D30 - Microeconomics - - Distribution - - - General

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