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Work and Consumption in an Era of Unbalanced Technological Advance

Benjamin M. Friedman

NBER Working Paper No. 21713
Issued in November 2015
NBER Program(s):The Monetary Economics Program

Keynes’s “Grandchildren” essay famously predicted both a rapid increase in productivity and a sharp shrinkage of the workweek – to fifteen hours – over the century from 1930. Keynes was right (so far) about output per capita, but wrong about the workweek. The key reason is that he failed to allow for changing distribution. With widening inequality, median income (and therefore the income of most families) has risen, and is now rising, much more slowly than he anticipated. The failure of the workweek to shrink as he predicted follows. Other factors, including habit formation, socially induced consumption preferences, and network effects are part of the story too. Combining the analysis of Keynes, Meade and Galbraith suggests a way forward for economic policy under the prevailing circumstances.

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Document Object Identifier (DOI): 10.3386/w21713

Published: Benjamin M. Friedman, 2017. "Work and consumption in an era of unbalanced technological advance," Journal of Evolutionary Economics, vol 27(2), pages 221-237.

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