Sidney and Beatrice Webb: Towards an Erhical Foundation of the Operation of the Labour Market

Guglielmo Forges Davanzati () and Andrea Pacella
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Guglielmo Forges Davanzati: University of Lecce, Department of Philosophy and Social Sciences

History of Economic Ideas, 2004, vol. 12, issue 3, 25-49

Abstract: This paper deals with the Webbs’ analysis of the labour market. It is divided into two parts. In the first part, starting from their approach to economic theory, where the plurality of motivations underlying agents’ behaviour is stressed, it is argued that – in line with their reflections – labour market deregulation is a counterproductive strategy in increasing output and employment. In fact, the competition between ‘benevolent’ and ‘unscrupulous’ entrepreneurs – where the former, unlike the latter, also take the well-being of their employees into consideration – favours the ‘unscrupulous’ entrepreneurs. This idea is further developed in a theoretical model which shows that union action and/or State intervention – in so far as they determine wage increases which, in turn, positively affect human capital accumulation and productivity – promote both growth in output and increase in demand, with the final outcome of increasing employment. It is therefore maintained that the spread of moral codes, unlike the traditional wisdom (ethics or economics), generates an increase in efficiency and social welfare.

Date: 2004
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