Competitive consumption and the 'fair wage': A Post Keynesian institutionalist approach

By Guglielmo Forges Davanzati, Guido Tortorella Esposito

PKES Working Paper 0804

April 2008
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It is a commonly accepted idea, within the Post Keynesian and circuitiste theoretical frameworks, that the unitary money wage is a given, and that the level of the real wage depends on firms’ production decisions (see Graziani, 2003). This argument has recently been enriched in the conviction that wage bargaining is also affected by institutional and ethical factors, thus giving rise to a socially accepted ‘fair wage’ (see Setterfield, 2007), where the ‘fair wage’ is assumed as a given. The aim of this paper is to explore the theoretical links existing between firms’ wage policies and the prevailing ethical codes, and argues that the ‘fair wage’ is the wage perceived as ‘fair’ within given social groups, basically dependent on workers’ comparison with their relative levels of consumption, as well as with the Veblenian “leisure class” consumption.


JEL classification: B29 J00