Work and Consumption in an Era of Unbalanced Technological Advance
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.
I am grateful to Ben Sprung-Keyser for research assistance and to two referees for helpful comments on an earlier draft. The conclusions I offer here differ from those I reached in a paper I wrote on this subject some years ago (Friedman, 2008). The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Benjamin M. Friedman, 2017. "Work and consumption in an era of unbalanced technological advance," Journal of Evolutionary Economics, vol 27(2), pages 221-237.